Greek Finance Minister resigns to smoothen talks with creditors

‘No’ mandate not a rupture with Europe: Prime Minister Alexis Tsipras.

July 06, 2015 11:23 am | Updated November 16, 2021 05:24 pm IST - ATHENS/FRANKFURT/PARIS

In this April 3, 2015 photo, Greece’s Finance Minister Yanis Varoufakis rides his motorcycle with then Deputy Foreign Minister Euclid Tsakalotos. Following Mr. Varoufakis’ resignation, the Greek govt. named Mr. Tsakalotos Finance Minister.

In this April 3, 2015 photo, Greece’s Finance Minister Yanis Varoufakis rides his motorcycle with then Deputy Foreign Minister Euclid Tsakalotos. Following Mr. Varoufakis’ resignation, the Greek govt. named Mr. Tsakalotos Finance Minister.

Greece’s outspoken Finance Minister Yanis Varoufakis resigned on Monday, removing one major obstacle to any deal to keep Athens in the euro zone after Greeks voted resoundingly to back the government in rejecting the austerity terms of a bailout.

Leftist Prime Minister Alexis Tsipras promised German Chancellor Angela Merkel that Greece would bring a proposal for a cash-for-reforms deal to an emergency summit of euro zone leaders on Tuesday, an official said.

However, Ms. Merkel said on Monday that the conditions for fresh talks on a new rescue package sought by Greece from the European Stability Mechanism were “not yet met.”

Mr. Tsipras said on Sunday that the ‘No’ victory in the country’s bailout referendum did not mean Athens was headed for a so-called Grexit. “This is not a mandate of rupture with Europe, but a mandate that bolsters our negotiating strength to achieve a viable deal,” he said in a televised address.

However, officials in Brussels and Berlin said a Greek exit from euro zone now looked ever more likely. But t hey also said talks to avert it would be easier without Mr. Varoufakis, an “erratic Marxist” economist who infuriated his euro zone finance ministers with an informal style and hectoring lectures.

His sacrifice suggested Mr. Tsipras is determined to try to reach a last-ditch compromise with European leaders.

The government has named lead bailout negotiator Euclid Tsakalotos, a softspoken academic economist, as the new Finance Minister.

Greece’s political leaders, more accustomed to screaming abuse at each other in Parliament, spent the day locked in talks at the President’s office trying to produce a national unity statement.

Door open for discussions: Hollande

France and Germany told Greece to come up with serious proposals in order to restart financial aid talks, raising pressure on Prime Minister Alexis Tsipras to compromise a day after his country voted overwhelmingly against more austerity.

After a meeting in Paris, German’s Ms. Merkel and French President Francois Hollande said Athens must move quickly if it wants to secure a cash-for-reform deal with international creditors and avoid crashing out of the euro.

Raising the stakes on the Greek leader ahead of a euro-zone summit on Tuesday, the European Central Bank decided to keep a tight grip on funding to Greek banks, which have been closed for more than a week to avoid a massive outflow of money that could lead to their collapse.

The ECB also decided to raise the amount of collateral Greek banks must post for any loans. The move doesn't affect the lenders right away, but it was a warning shot by the ECB to Greek banks that their fate lies in its hands.

And a German finance ministry official dismissed the idea that Berlin would be willing to concede some debt relief to Athens, a position that Mr. Tsipras' government has long sought.

Still, in a sign that Athens is keen to seek a new deal, Greece's combative finance minister, Mr. Varoufakis, resigned, apparently under pressure from other euro zone finance ministers who did not want him as a negotiating partner.

Mr. Tsipras had earlier promised Ms. Merkel that Greece would bring a proposal for a deal to an emergency summit of euro zone leaders on Tuesday, a Greek official said. It was unclear how much it would differ from other proposals rejected in the past.

"The door is open for discussion," Mr. Hollande told reporters, standing next to Ms. Merkel after talks at the Elysee Palace.

"It's now up to the government of Alexis Tsipras to offer serious, credible proposals so that this will can be turned into a programme which gives a long-term perspective, because Greece needs a long-term perspective in the euro zone with stable rules, as the euro zone itself does."

Not much time

Mr. Hollande stressed that there is not much time left while Ms. Merkel urged Greece to put proposals on the table this week.

Dutch Prime Minister Mark Rutte said Greece must accept deep reforms if it wants to remain in the euro.

He told the Netherlands parliament that creditors had no plans to draft a new proposal after the "no" vote and Greece had to come up with a new proposal ahead of Tuesday's summit.

"They must make a decision, this evening or tonight, what they are going to do," Mr. Rutte said. If the Greeks went to Brussels demanding changes because they felt supported by the "no" vote and refused reforms "then I think it is over".

To win any new deal, Greece will have to overcome deep distrust among partners, above all Germany, Greece's biggest creditor and the EU's biggest economy, where public opinion has hardened in favour of cutting Greece loose from the euro.


While jubilant Greeks celebrated their national gesture of defiance late into the night, there was gloom in Brussels.

European Commission Vice-President Valdis Dombrovskis said there was no easy way out of the crisis and the referendum result had widened the gap between Greece and other euro zone countries.

An E.U. source said barring some major Greek concession, euro zone leaders were more likely to discuss on Tuesday how to cope with a Greek exit, and how to reinforce the remaining currency union, than any new aid programme for Athens.

While France and Italy have emphasised the importance of more talks, a big majority of the 19 euro zone governments favour taking a hard line with Greece, diplomats said, and German public opinion is running out of patience.

Ms. Merkel's vice-chancellor, Social Democrat Sigmar Gabriel, told a news conference: "If Greece wants to stay in the euro, the Greek government must quickly make a substantive offer that goes beyond its willingness thus far."

The Greek bank association chief said an eight-day-old bank closure that has crippled the economy will continue on Tuesday and Wednesday and the daily cash machine withdrawal limit of €60 would be maintained. There were long lines at ATMs, where €20 banknotes have largely run out.

Greece's immediate fate is in the hands of the European Central Bank, which kept a tight funding grip on Greece's banks on Monday in a decision that will see them run out of cash soon.

There had been little prospect of the ECB adopting a more generous stance after Greeks voted overwhelmingly to reject the terms of an international bailout.

In a sign of mounting preoccupation at the country's financial state, Mr. Tsipras told European Central Bank President Mario Draghi during a phone call on Monday that there was an immediate need to lift capital controls, imposed in an effort to prevent a collapse of the banking system.

‘Brave choice’

After five years of economic crisis and mass unemployment, Greek electors voted 61.3 per cent ‘no’ to the bailout conditions already rejected by their radical leftist government, casting Greece into the unknown.

“You made a very brave choice,” Mr. Tsipras said in a televised address as jubilant supporters thronged Athens' central Syntagma Square to celebrate the act of defiance of Europe's political and financial establishment.

The euro slid against the dollar after the setback for Europe's monetary union, and European shares and bonds took a hit when markets opened after the weekend. But the losses were contained and there was no sign of serious contagion to other weaker euro zone sovereigns.

Analysts with several international banks said a "Grexit" from the euro zone was now their most likely scenario.

E.U. officials said it would be hard to give Greece easier terms, not least because its economy has plunged back into recession since Tsipras' Syriza party won power in January. Public finances were now in a far worse position than when the rejected bailout deal was put together.

But in Athens, citizens were unrepentant at their vote.

"I voted 'no' to austerity; I want this torture to end," said Katerina Sarri, 42, a mother of two.

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