Eurozone in nose-dive as Greece rejects bailout

“No” supporters carry a burned EU flag in Thessaloniki, Greece, on Sunday. PHOTO by AFP

Athens- Greek voters overwhelmingly rejected international creditors’ tough bailout terms Sunday, but premier Alexis Tsipras insisted the result does not mean a “rupture” with Europe despite fears it will end in a “Grexit” from the eurozone.

With the final tally showing the ‘No’ vote winning by more than 61 per cent, the historic referendum represented a victory for the radical left prime minister, who said his negotiating position to secure a new debt deal was now greatly bolstered.

As eurozone leaders scrambled to work out their response, German Chancellor Angela Merkel and French President Francois Hollande called a European summit for Tuesday and declared that the Greeks’ decision must “be respected” .

Thousands of pro-government supporters cheered and hugged each other in central Athens in celebration, although some other Greeks expressed pessimism that Tsipras would be able to deliver on his promises.

Figures released by the Interior Ministry showed the final tally at 61.31 per cent voting ‘No’ and 38.69 per cent voting ‘Yes’. Participation stood at 62.5 per cent.

‘Torn down the bridges’
European leaders reacted with a mix of dismay and caution to the resounding election results, which also sent the battered single currency plummeting.

Tsipras has “torn down the bridges” between Greece and Europe, Merkel’s deputy chancellor, German Economy Minister Sigmar Gabriel, told the Tagesspiegel newspaper.

Despite the Greek premier’s assertions, new bailout negotiations now were “difficult to imagine”, he said.

European Commission president Jean-Claude Juncker — who had said a Greek ‘No’ would be “no to Europe” — was to speak to the European Central Bank (ECB) and eurozone finance ministers on Sunday and Monday.

The head of the Eurogroup of eurozone finance ministers, Jeroen Dijsselbloem, called the Greek ‘No’ result “very regrettable for the future of Greece”.

In Asian trade, the euro help up against the dollar after dropping in the immediate wake of the vote, changing hands at $1.1024 to claw back some of the losses it suffered in New York electronic trade where it fell at one point to $1.0987.

Regional bourses sagged in the aftermath of the vote, led by Tokyo which was down 1.61 per cent as investors retreated while they watch Greece’s creditors plan their next move.

In a televised address after the referendum, Tsipras insisted the vote did not mean a break with Europe. He has emphasised that euro membership is meant to be “irreversible” with no legal avenue to boot a country out.

“This is not an mandate of rupture with Europe, but a mandate that bolsters our negotiating strength to achieve a viable deal,” he said.

Tsipras said the creditors — the ECB, the European Commission and the International Monetary Fund (IMF) — would now finally have to talk about restructuring the massive, 240-billion-euro ($267 billion) debt Greece owes them.

“This time, the debt will be on the negotiating table,” he said.

Voters celebrate
Punching the air, kissing and cheering, the ‘No’ camp in Athens exulted as the results came through.

“This is a victory for the Greek people, a chance for Europe,” said Giorgos, 25, who had rushed along with his girlfriend to join some 6,000 people celebrating their triumph.

“Spain, and then Portugal, should follow this path. We’re for a Europe of the people,” he said, brushing off concerns the result could see the debt-laden country plunge further into the financial mire.

“This is Europe’s chance to become what it should have been in the beginning,” said 37-year-old Dima Rousso.

While many of those who voted ‘No’ were youths hit by record jobless rates, there were also elderly people in the crowds, wrapped in Greek flags and dancing in time with the victory chants.

But the mood of jubilation was not shared by all ‘No’ voters, with some saying they had been confronted with an impossible choice.

“A ‘No’ victory doesn’t mean there’s any more hope for Greece than before,” said Nika Spenzes, 33 and unemployed, who was walking in the opposite direction of the party.

Even ‘Yes’ voters were ambivalent about their camp’s apparent defeat.

Paris, a 41-year-old dentist, said she was resigned rather than sad because, with the dire state of Greece’s finances and Tsipras in power, there was “no real hope either way”.

Greece’s conservative opposition chief Antonis Samaras announced his resignation as the early results of the referendum became clear Sunday. His New Democracy party had campaigned for a ‘Yes’ result in the referendum.

On the brink
Greece is teetering on the brink of financial collapse. If it doesn’t receive cash and loans soon from European institutions, it could still be forced to resort to government IOUs or a return to drachmas to keep its economy running.

Last Tuesday, the country defaulted on a 1.5-billion-euro repayment to the IMF, becoming the first developed country to fall into arrears to the institution. As a result, it is cut off from further IMF financing until it settles the amount.

The same day, the last bailout for Greece ran out, despite Tsipras’s appeals for it to be extended until the referendum was over.

Greece was officially declared in default on Friday by the European Financial Stability Facility, which holds 144.6 billion euros ($160 billion) of Greek loans.

Greek banks are now reportedly almost illiquid after a run by panicked customers in the lead-up to the referendum, which Tsipras abruptly called on June 27 to break an impasse with the creditors.

A weeklong closure of the banks and capital controls that included restricting daily ATM withdrawals to just 60 euros ($67) and blocking money transfers abroad slowed the outflow.

But if the ECB doesn’t inject emergency euros into Greece’s banks in the next one or two days, more businesses will go belly up and ordinary Greeks will suffer.

Government spokesman Gabriel Sakellaridis said late Sunday that the Bank of Greece was asking for the ECB to provide money under its Emergency Liquidity Assistance mechanism.

9 days in the crisis

Saturday, June 27: Prime Minister Alexis Tsipras calls a July 5 referendum on whether or not to accept the terms of the latest round of bailout aid. Eurozone finance ministers decide to let a Greek rescue plan expire on June 30, effectively ending talks with Athens on more aid. Greeks start withdrawing large sums of money from ATMs.

Sunday, June 28: The European Central Bank (ECB) says it will maintain an emergency cash lifeline to Greece but not increase its level, raising fears of a liquidity crunch.

Greek officials enact capital controls that limit ATM withdrawals by Greeks to 60 euros ($65) per day and close banks until July 7. Pensioners without bank cards can withdraw money from banks however, and foreign tourists are not subjected to the limit.

Monday, June 29: European Commission head Jean-Claude Juncker says he feels “betrayed” by the Greek actions.

Tuesday, June 30: Tsipras seeks a 30-billion-euro deal with the European Stability Mechanism to cover state financing needs and restructure Greece’s crushing debt. At midnight, Greece misses the deadline to repay 1.5 billion euros in loans to the IMF.

Wednesday, July 1: German Finance Minister Wolfgang Schaeuble presses Athens to “clarify its position on what it wants”.

Thursday, July 2: Greek Finance Minister Yanis Varoufakis says he will resign if voters do not back the government in the referendum. It has urged voters to reject the terms of a rescue package that has already expired but which could be the basis for future talks.

The IMF estimates that Greece needs 50 billion euros over the next three years, including 36 billion euros more from EU lenders, and debt relief to stabilise.

Friday, July 3: The EFSF declares “an event of default by Greece” after the missed IMF payment. It has nonetheless “decided not to request immediate repayment of its loans nor to waive its right to action,” a statement says. Tsipras calls for a 30 percent cut of the Greek debt and a 20-year grace period for the rest. Total Greek debt is 323 billion euros, or nearly 180 percent of its gross domestic product (GDP).

European Commission chief Juncker says Greece’s negotiating position with creditors would be “dramatically weakened” in the event of a “No” vote. Crowds gather at rival rallies in central Athens — the biggest of the referendum campaign — with Tsipras telling supporters a “No” vote would strengthen his hand in talks.

Saturday, July 4: As tensions grow on the eve of the vote, Varoufakis accuses Athens’ creditors of “terrorism” and scare-mongering, denying reports that Greek savers could lose 30 percent of their deposits to shore up the banks.

Sunday, July 5: Greeks reject creditors’ bailout terms with over 61 per cent voting ‘No’ in the referendum, prompting Eurozone nations to announce a summit for July 7. The head of the Eurogroup of eurozone finance ministers, Jeroen Dijsselbloem, calls the result “very regrettable for the future of Greece”.