[Marxism] Germany Maintains a Hard Line on Greece Debt After Vote

Louis Proyect lnp3 at panix.com
Mon Jul 6 15:36:14 MDT 2015

NY Times, July 6 2015
Germany Maintains a Hard Line on Greece Debt After Vote

ATHENS — Germany maintained a hard line with Athens on Monday after 
Greek voters rejected Europe’s austerity policies in a referendum, 
intensifying pressure on Prime Minister Alexis Tsipras to restart 
bailout talks and opening a rift with European countries that appeared 
more inclined now to consider softening the push for austerity.

As Mr. Tsipras changed his finance minister Monday and laid plans to 
restart bailout negotiations with creditors, however, it appeared the 
jubilation that followed the no vote in Greece could fade quickly as 
signs of financial collapse become more evident.

While the referendum may have lifted Mr. Tsipras’s popularity and bought 
some time to return to negotiations, Greek banks are almost out of cash 
and are expected to stay closed for at least several more days, analysts 
and people close to the situation in Greece said.

The government decided on Monday that a bank holiday scheduled to end 
Tuesday would now be extended through Wednesday, and a daily cap on 
A.T.M. withdrawals of 60 euros, about $66, in place since last week, 
could be tightened. An announcement was expected later in the day. Long 
lines formed again at cash machines in Athens on Monday as people 
continued to take out money in dribs and drabs.

The European Central Bank decided Monday to maintain emergency loans to 
Greek banks at about 89 billion euros, a level that keeps them from 
failing but will not prevent them from running out of cash they can 
issue to depositors within a few days.

Ominously, the central bank also said it would tighten requirements for 
collateral that Greek banks must post in return for loans. The decision 
means that, even if the European Central Bank decides to increase the 
lending limit, Greek banks might not have enough collateral needed to 
qualify for more emergency cash.

The decision was a concession to hard liners on the central bank’s 
Governing Council, and a sign the central bank is worried about losses 
it would suffer if Greek banks fail.

If a deal for emergency financial aid or a reduction of the nation’s 
mountainous debt is not struck soon, Greece will probably default on 
international loans this month, and paying civil servants and pensioners 
will be increasingly problematic. Should Greece run out of euros in the 
absence of a deal, it could soon be forced to issue a parallel currency 
or i.o.u.s to pay its domestic bills, leading it out of the euro currency.

Mr. Tsipras on Monday took the first steps toward conciliation with 
Greece’s creditors. The combative finance minister, Yanis Varoufakis, 
abruptly resigned at Mr. Tsipras’s behest, and was replaced by Euclid 
Tsakalotos, an Oxford-educated economist who took over from Mr. 
Varoufakis as Greece’s lead negotiator at the end of April.

After a six-hour meeting, the leaders of Greece’s five main political 
parties issued a statement saying they would seek discussions with 
creditors to secure sufficient funds for the nation’s financing needs. 
They also pledged to carry out “credible reforms,” tackle unemployment 
and broach the issue of making Greece’s large public debt more sustainable.

Still, Germany, the eurozone country to which Greece owes the most money 
and the one that has tended to take the hardest line in the debt talks, 
warned on Monday against hopes for a quick resolution. A spokesman for 
the Finance Ministry said Berlin saw no new basis for negotiations with 
Athens at this point.

The spokesman for Angela Merkel, Germany’s chancellor, said that while 
Greece was still in the eurozone, it was up to Athens to determine 
whether the country would stay.

The Greek government said Monday afternoon that Mr. Tsipras and Ms. 
Merkel had spoken by telephone and had agreed that he would present new 
debt proposals on Tuesday, when eurozone leaders are to meet in Brussels.

Other European leaders seemed eager to avoid the specter of a Greek exit 
from the euro, especially since the narrative over the wisdom of 
austerity appeared to have shifted in popular opinion, as images of 
Greeks celebrating their repudiation of austerity were broadcast worldwide.

Officials in France and in Brussels said on Monday that they were 
unhappy and dumbfounded with the no vote, but let it be known that they 
would hold the door open to the possibility of a compromise between 
Greece and its creditors.

At a news conference in Brussels on Monday, the European Commission’s 
vice president for euro affairs, Valdis Dombrovskis, said that the no 
vote in Greece would “dramatically weaken” the country’s negotiating 
stand with creditors and had made things “more complicated.”

But now is the time to seek a way forward, he said, adding, “If all 
sides are working seriously, it’s possible to find a solution, even in 
this very complicated situation.”

The French finance minister, Michel Sapin, said on French radio Monday 
that while Greece’s no vote “resolves nothing,” France could support 
debt relief for Greece should Mr. Tsipras come forward with a proposal 
containing “serious” terms for a new bailout package.

Mr. Sapin’s remarks came ahead of a meeting set for Monday evening in 
Paris between President François Hollande of France and Ms. Merkel to 
discuss how to deal with Greece.

Mr. Tsipras may recognize that Greece has only days, if not hours, to 
wring some kind of deal from its creditors before full-scale economic 
collapse sets in. The country’s banks are on the verge of running out of 
euros, and Greeks could soon begin to suffer shortages of fuel and other 
imported goods.

“By the end of the week, we may see most A.T.M.s out of cash, massive 
pressure on the payment of upcoming public sector wages, tourism issues 
and wider economic damage,” analysts at Deutsche Bank said on Monday in 
a note to clients.

But the critical issue remains what proposal any new Greek team will 
bring to the table.

Mr. Varoufakis, an academic with no political experience before he 
joined the leftist Tsipras government, had consistently argued that 
Greece desperately needed debt relief more than anything else. While 
many economists shared that view, he quickly became a lightning rod 
among Greece’s creditors for his aggressive negotiating style and heated 
language. Before the referendum vote, he had publicly accused the 
creditors of “terrorism” against his country.

With Mr. Varoufakis gone, Greece’s eurozone creditors may be more 
willing to continue negotiations on a further aid package. His departure 
could be seen as a concession to the sensibilities of other eurozone 
leaders. But the next few days could determine whether the gulf between 
Greece and its creditors is now too wide to bridge.

The Eurogroup of eurozone finance ministers, with whom Greece broke off 
debt talks late last month, planned to meet in Brussels Monday afternoon 
to discuss an offer by Athens to resume discussions. Because the 
deadline for the country’s second bailout package has lapsed, any talks 
in the Eurogroup on Greek proposals would most likely focus on the terms 
for a third aid package for the country.

The meeting between Mr. Hollande and Ms. Merkel on Monday evening could 
prove crucial because, while Germany has taken the hardest line against 
Greece, France has shown signs of being more conciliatory.

The two leaders are scheduled to make a brief statement to the news 
media at 7:15 p.m. in Paris before a working dinner, after which they do 
not plan to make any further announcement, the French government said.

Mr. Varoufakis, who announced his resignation via a Twitter message, 
said in a statement on his website that he was stepping down because 
Greece’s creditors had made it clear that they did not want to negotiate 
any further with him.

“Soon after the announcement of the referendum results, I was made aware 
of a certain preference by some Eurogroup participants, and assorted 
‘partners,’ for my … ‘absence’ from its meetings; an idea that the prime 
minister judged to be potentially helpful to him in reaching an 
agreement,” he said. “For this reason, I am leaving the Ministry of 
Finance today.”

Mr. Varoufakis called for the prompt conclusion of “an agreement that 
involves debt restructuring, less austerity, redistribution in favor of 
the needy and real reforms.”

He included in his announcement a Parthian shot at his interlocutors in 
the debt negotiations, saying, “I shall wear the creditors’ loathing 
with pride.”

The French finance minister, Mr. Sapin, in his radio interview on 
Monday, criticized Mr. Varoufakis for the “terrorism” accusation against 

“That was wrong,” he said, speaking after Mr. Varoufakis announced his 
resignation. “This was a spirited man, who has faith. But he also made 
statements that were difficult to accept, especially in France, 
including using the term ‘terrorism.’”

But Mr. Sapin indicated that the French government would draw a 
distinction between any resentment of Mr. Varoufakis’s negotiating 
tactics and the problems still facing Greece.

If Greece now comes back to the negotiating table with a solid plan to 
jump-start talks, France could be prepared to “ensure that in the early 
days, the early years, Greece’s debt is alleviated,” Mr. Sapin said.

A Greek exit from the eurozone “is not desired by the French president,” 
Mr. Sapin said. Nonetheless, he added, if Greece were to leave the euro, 
the currency bloc would not be destabilized.

Liz Alderman reported from Athens, and Jack Ewing from Frankfurt. Niki 
Kitsantonis contributed reporting from Athens.

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