France and Germany told Greece on Monday to come up with concrete proposals in order to restart financial aid talks – a day after Greeks voted overwhelmingly to reject more austerity.
German Chancellor Angela Merkel and French President Francois Hollande, the euro zone’s most powerful leaders, said that Athens must move quickly if it wants to secure a cash-for-reform deal with creditors and avoid crashing out of the single currency.
Raising the pressure on Greek Prime Minister Alexis Tsipras before a euro zone summit on Tuesday, the European Central Bank decided to keep a tight grip on funding to Greek banks.
By voting decisively against tough bailout conditions, as Tsipras had urged them to do, Greeks have strengthened his negotiating hand. But the crisis remains acute, with the country’s banks already closed for more than a week to avoid a massive outflow of money that could lead to their collapse.
At ECB’s Mercy
Only emergency support from the ECB is keeping the banks afloat and saving Greece from a chaotic euro exit that would inflict more pain on its people and gravely damage the currency, the strongest symbol of the EU’s drive for an “ever closer union” on a continent once ravaged by two world wars.
In a warning shot to the banks, the ECB raised the amount of collateral they must post for any loans. The move does not affect the lenders right away, but serves as a reminder that their fate lies in its hands.
Merkel-Hollande Talks
After talks with Hollande earlier in the day in Paris, Merkel said, “We say very clearly that the door for talks remains open and the meeting of euro zone leaders tomorrow should be understood in this sense.”
But, she added, the requirements were not in place at the moment to start negotiations about a concrete euro zone bailout fund programme.
It’s now up to the government of Alexis Tsipras to offer serious, credible proposals so that this 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.
– Francois Hollande, French President
US-Japan Press for Urgency
Top officials in both the United States and Japan called on both sides to seek a resolution.
The US Treasury Secretary Jack Lew spoke with both Tsipras and his new finance minister and said Washington looked forward to Athens and other parties resuming conversations toward resolving the Greek situation, a Treasury spokeswoman said.
Similarly, Japan’s economics minister, Akira Amari, said Greece and the European Union should work hard to strike a win-win deal that would keep Greece in the currency union.
I understand why the Greek people are venting their frustration. Fiscal consolidation is not making progress. They are in deflation. The world expects Greece and the EU to cooperate on a final bailout plan.
– Akira Amari, Japan’s Economics Minister
Not Much Time
Hollande stressed that there was not much time left, while 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.
They (the Greeks) must make a decision, this evening or tonight, what they are going to do. 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.
– Mark Rutte, Prime Minister Netherlands
After the Greek “No” vote, gloomy officials in Brussels and Berlin said a Greek exit from the currency area now looked ever more likely.
Of Making Amends and Striking New Deals
Meanwhile, Greece’s political leaders, more accustomed to screaming abuse at each other in parliament, issued an unprecedented joint statement after a day of talks at the president’s office backing efforts to reach a deal with creditors.
They called for immediate steps to reopen banks and said any deal must address debt sustainability – code for reducing Athens’ crushing debt – but gave no hint of concessions from the Greek side toward its creditors’ demands for deep spending cuts and far-reaching reforms of pensions and labour markets.
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.
Taking a Hard Line With Greece
While jubilant Greeks celebrated their national gesture of defiance late into the night, there was gloom in Brussels.
Though 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.
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