Greece talks to world leaders as economy flounders

The Taoiseach Enda Kenny has said that Greece will need to make the next move if it wants any more help from Europe.

The only lesson the United States should draw from Greece: http://t.co/hINhxkjVqu

— Daniel W. Drezner (@dandrezner) July 6, 2015

Irish journalist Shona Murray is in Athens, she said that there is a palpable sense of fear because access to cash is dwindling.

"Tourists and non-Greeks are allowed to take money out of ATMs at this point of amounts over €60, but there are also concerns about the fact that smaller tenders are dwindling in numbers, so people can only take €50 notes out in some ATMs, and the queues are very long all through Athens and in the suburbs," said Ms Murray.

With Greek banks running out of cash and facing the danger of collapse within days without new aid, the government in Athens is racing against the clock.

In an effort to facilitate negotiations on a new aid programme, finance minister Yanis Varoufakis, who had clashed with European officials in the bailout talks, announced his resignation.

But Greece and its creditors, who will meet again tomorrow to discuss how to keep the country in the euro, remain far apart on key issues, particularly the notion of debt relief.

The negotiations are complicated for the European creditors by prime minister Alexis Tsipras’s triumph in Sunday’s referendum.

More than 61% of Greeks backed his call to vote No to budget cuts the creditors had proposed in return for rescue loans the country needs – even though those proposals were no longer on the table.

The vote was painted by opposition parties and many European officials as one on whether Greece should remain in Europe’s joint currency. In the aftermath, many officials softened their tone and said talks would resume, though Greece’s chances of staying in the euro were looking increasingly shaky.

The country’s banks remain shut for a sixth working day as the government tries to limit a drain of deposits despite limits on cash withdrawals at ATMs.

And bank closures in Greece could continue for a few more days. Bankers have told news agency Retuers that Greece will issue a new decree today to extend the bank holiday.

All eyes now turn to whether the European Central Bank will increase the amount of credit the banks can draw on to make up for the cash drain. Analysts expect the ECB to not provide more emergency assistance today, meaning Greece might have to tighten its limits on cash withdrawals and transfers from the current €60 per day.

If the ECB does not increase its help to the banks, it will be impossible for Mr Tsipras to keep his pledge to quickly restore Greece’s banking system.

The Greek government has vowed to quickly restart negotiations with creditors in other eurozone countries and with the institutions that oversaw the country’s bailout: the ECB, European Commission and International Monetary Fund.

Mr Varoufakis appared to be the first casualty of the vote’s fallout.

With his brash style and fondness for frequent media appearances, Mr Varoufakis had visibly annoyed many of the eurozone’s finance ministers during Greece’s debt negotiations.

Mr Varoufakis said in a statement he was told shortly after the referendum result that some other eurozone finance ministers and the country’s other creditors would appreciate his not attending the ministers’ meetings.

In pictures: Varoufakis - Greece's rebel finance minister. See more: http://t.co/zPRCgcHyVP #GreekCrisis #Greece pic.twitter.com/C6AU6vQOkX

— Reuters (@Reuters) July 6, 2015

The idea was one “that the prime minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the ministry of finance today”, he said.

As for his European negotiating colleagues, he said of them: “I shall wear the creditors’ loathing with pride.”

With his high-stakes gamble to call a referendum with just a week’s notice, Mr Tsipras aimed to show creditors that Greeks, whose economy has been shattered and who face spiralling unemployment and poverty, have had enough and that the austerity prescribed is not working.

But everything hinges on European reaction. A eurozone summit was hastily called for tomorrow afternoon to discuss the situation.

European officials appear to be split on a key demand by Greece to have the burden of its bailout loans be made more manageable.

France’s finance minister, Michel Sapin, indicated that discussing Greece’s debt is not taboo, saying the country could not recover with its current obligations “in the months and years to come”.

Mr Sapin also called for the ECB to maintain liquidity assistance to Greek banks.

Germany, however, remains reluctant to discuss debt forgiveness.

Finance ministry spokesman Martin Jaeger said Germany’s “position is well-known ... a debt cut is not an issue for us”.

More broadly, chancellor Angela Merkel’s spokesman said talks on a new bailout programme for Greece would depend on what proposals Athens makes.

Steffen Seibert said Germany respects the “clear No vote” by Greeks against austerity measures.

However, he added that “in view of Greek citizens’ decision yesterday, the conditions are not there at present to enter negotiations on a new programme”.

He said the No vote is a vote against the principle – still supported by Germany – that solidarity requires countries to make their own reform efforts.

Besieged by a prolonged recession, high unemployment and banks dangerously low on capital, Greece defaulted on an IMF loan repayment last week, becoming the first developed nation to do so.

Now some analysts wonder if Greece is so starved of cash that it could be forced to start issuing its own currency and become the first country to leave the 19-member eurozone, established in 1999.

Greece's faltering banking system is trapping the country in its own vicious circle, says @pauljdavies. http://t.co/ln8imhUBrR

— The Wall Street Journal (@WSJ) July 6, 2015

Mr Tsipras was elected in January on promises to repeal the austerity demanded in return for its bailout and negotiations broke down late last month after dragging on unsuccessfully for five months.

Russian president Vladimir Putin has spoken to Mr Tsipras, the Kremlin said.

The two leaders discussed the results of Sunday’s referendum in Greece and “several questions about the further development of Russian-Greek co-operation”, the Kremlin said.

During Monday’s call, the Kremlin said Mr Putin “expressed support for the Greek people in overcoming the difficulties facing their country”.

The head of VTB, Russia’s second-largest state bank, said over the weekend that Russia might be interested in buying Greek assets if they were to be privatised.

Andrei Kostin said Russia might be interested in ports, airports, railways or companies in the energy sector but that Russia would be unlikely to give Greece loans.

Mr Tsipras has spoken on the telephone with Mrs Merkel, telling the German chancellor he would present Greece's proposals to restart talks with creditors at the Brussels meetings, a government official in Athens said.

Talks between Athens and bailout lenders were halted during the week-long referendum campaign.