Greece launches bailout bid following referendum win

As the Greek leader readied proposals to restart bailout talks, the situation was complicated by the European Central Bank’s (ECB) refusal late yesterday to increase assistance for Greek banks desperately needing cash and facing imminent collapse unless a rescue deal is reached.

A hastily called meeting of eurozone finance ministers is slated for this afternoon, and a full summit of the leaders of the 19 euro countries was to be held that evening.

With Greece’s future in the European Union and its euro currency at stake, yesterday’s meeting between German chancellor Angela Merkel and French president Francois Hollande in Paris set the tone for the Brussels talks.

“Time is of the essence,” Ms Merkel said afterwards. “(Greek) proposals have to be on the table this week.”

Mr Tsipras scored a bigger than expected win in Sunday’s bailout referendum, with 61%of voters rejecting the economic measures creditors had proposed in exchange for loans Greece needs to remain afloat, including further cuts to pensions.

In a sign of compromise, Mr Tsipras appointed a new finance minister to lead talks with creditors and replace Yanis Varoufakis, who clashed with his European counterparts.

Euclid Tsakalotos, a 55-year-old economist, has appeared more willing to engage with creditors. He will be tested in Brussels.

“I won’t hide from you that I am very nervous and very anxious. I am not taking over at the easiest moment in Greek history,” Mr Tsakalotos said after being sworn in.

Greek banks are running out of cash even after the government placed limits on how much depositors can withdraw. The ECB has been providing emergency credit to the banks, but yesterday said it could not increase the amount offered because the banks’ collateral was weaker now, after the No vote.

Normal commerce is now impossible in Greece. Small businesses, lacking use of credit cards or money from bank accounts, were left to rely on cash coming from diminishing purchases from customers.

But Greeks are holding tightly onto what cash they have. And suppliers are demanding that businesses pay cash up front.

'Greece must follow Europe's rules

In Paris, Ms Merkel and Mr Hollande both expressed respect for Greek voters, but urged swift action from Athens.

Mr Hollande said: “I stress that there is not lots of time left. There is urgency for Greece. There is urgency for Europe.”

Spanish prime minister Mariano Rajoy said that if Greece is to remain part of the eurozone, it needs to enact reforms that will spur economic growth and pay off its debt.

“We’re inclined to help Greece but Greece must follow Europe’s rules,” he said.

The ongoing Greek drama hurt stocks around the world, particularly in Europe. The losses were not as great as some had feared, however, suggesting investors think that a possible Greek exit from the euro would be manageable for the global economy, though devastating for Greece and destabilising in Europe.

“The No vote in Greece’s referendum on Sunday dramatically increases the risk of a slide toward a disorderly Greek exit from the eurozone,” ratings agency Fitch said. “An agreement between Greece and its official creditors remains possible, but time is short and the risk of policy missteps, or that the two sides simply cannot agree on a deal, is high.”

Mr Tsipras has agreed to imposing more harsh austerity measures, but he wants eurozone lenders to grant the country better terms for bailout debt repayments.

“The prime minister is ... committed to starting a fundamental debate on dealing with the problem of sustainability of the Greek national debt,” a statement signed by the government and three pro-European opposition parties said in a rare sign of solidarity.

Greece, after years of crippling recession and spiralling unemployment, has already been granted €240 billion in loans from other eurozone countries.

But the spending restraint demanded as a condition for the loans hurt economic growth, and reforms to make Greece more business-friendly have been slower than hoped.

European officials remain split on Greece’s demand for easier debt repayment - with lead eurozone lender Germany still reluctant.

James Nixon, chief European economist at Oxford Economics, said there’s “a narrow trajectory from here that sees an emboldened Greek parliament accepting the need for reform in return for a debt write-down”.

“The next 48 hours will be crucial.”