EU leaders to meet in crisis summit following Greek 'no' vote

Greek Prime Minister Alexis Tsipras has gotten his way on the referendum to accept or reject the bailout terms of the EU.  With a resounding "no" vote, the Greek electorate swallowed whole Tsipras's delusion that rejecting the bailout terms would strengthen his negotiating position.

In fact, he has fatally weakened it, and it's questionable whether the Greek economy survives the week.

The twin power centers in Europe – the European Commission and the European Central Bank – are both saying this morning that the next move is up to Greece.  EU finance ministers are saying that negotiations are still possilble but that Greece must come up with new proposals.

And the Germans, who hold the lifeline for Greece in their hands, are adamant that the referendum changes nothing.

The Telegraph:

Chancellor Angela Merkel's spokesman says Germany sees no basis at present for entering negotiations on a new bailout program for Greece.

Steffen Seibert said Monday that Germany respects the "clear 'no' vote" by Greeks against austerity measures demanded by creditors and that "the door for talks always remains open."

However, he said the conditions are "not there at present to enter negotiations on a new program." He said the "no" vote is a vote against the principle - still supported by Germany - that solidarity requires countries to take responsibility.

Seibert says Europe will explore what possibilities there are to help Greek citizens and "a lot will depend on what proposals the Greek government now puts on the table."

Regarding requests by Athens to restructure its debt, finance ministry spokesman Martin Jaeger said: "I can see no reason to enter into discussions."

Meanwhile, ECB governing council member Christian Noyer said that Greece's debt cannot be restructured.

"Greek debt held by the Eurosystem is debt that cannot by its very nature be restructured because that would be monetary financing of a state," he said.

Meanwhile, Greek finance minister Yanis Varoufakis has resigned.  This is a tactical move by Greece in that Varoufakis is intensely disliked by the other EU finance ministers due to his arrogant, bombastic rhetoric about the EU committing "terrorism" against Greece and veiled references to German Nazis.  Putting it simply, Varoufakis was not the man to enter into what is sure to be extremely delicate negotiations with the EU.

But will a softer front by Greece make a difference?  Not in the short term.  The fate of the Greek economy is now firmly in the hands of the eurogroup.  When Greek banks reopen tomorrow, they will not have enough cash to cover withdrawals unless the ECB renews its emergency funding mechanism for Greece.  And if they do, it is possible that many Greek depositors will be forced into ceding up to 30% of their money to the central bank in a gigantic haircut.  The ECB has indicated that it will no longer finance the run on Greek banks that has siphoned cash out of the system, and in order to recapitalize them, depositors must pay part of the price.

But the immediate worry is what the EU leaders will do and what the ECB is prepared to do in order to prevent the unprecedented chaos of a meltdown.  No modern society has ever experienced what Greece is about to experience, and no one knows if the tenuous bonds of civilization will hold under the enormous pressure of a financial collapse.

Greek Prime Minister Alexis Tsipras has gotten his way on the referendum to accept or reject the bailout terms of the EU.  With a resounding "no" vote, the Greek electorate swallowed whole Tsipras's delusion that rejecting the bailout terms would strengthen his negotiating position.

In fact, he has fatally weakened it, and it's questionable whether the Greek economy survives the week.

The twin power centers in Europe – the European Commission and the European Central Bank – are both saying this morning that the next move is up to Greece.  EU finance ministers are saying that negotiations are still possilble but that Greece must come up with new proposals.

And the Germans, who hold the lifeline for Greece in their hands, are adamant that the referendum changes nothing.

The Telegraph:

Chancellor Angela Merkel's spokesman says Germany sees no basis at present for entering negotiations on a new bailout program for Greece.

Steffen Seibert said Monday that Germany respects the "clear 'no' vote" by Greeks against austerity measures demanded by creditors and that "the door for talks always remains open."

However, he said the conditions are "not there at present to enter negotiations on a new program." He said the "no" vote is a vote against the principle - still supported by Germany - that solidarity requires countries to take responsibility.

Seibert says Europe will explore what possibilities there are to help Greek citizens and "a lot will depend on what proposals the Greek government now puts on the table."

Regarding requests by Athens to restructure its debt, finance ministry spokesman Martin Jaeger said: "I can see no reason to enter into discussions."

Meanwhile, ECB governing council member Christian Noyer said that Greece's debt cannot be restructured.

"Greek debt held by the Eurosystem is debt that cannot by its very nature be restructured because that would be monetary financing of a state," he said.

Meanwhile, Greek finance minister Yanis Varoufakis has resigned.  This is a tactical move by Greece in that Varoufakis is intensely disliked by the other EU finance ministers due to his arrogant, bombastic rhetoric about the EU committing "terrorism" against Greece and veiled references to German Nazis.  Putting it simply, Varoufakis was not the man to enter into what is sure to be extremely delicate negotiations with the EU.

But will a softer front by Greece make a difference?  Not in the short term.  The fate of the Greek economy is now firmly in the hands of the eurogroup.  When Greek banks reopen tomorrow, they will not have enough cash to cover withdrawals unless the ECB renews its emergency funding mechanism for Greece.  And if they do, it is possible that many Greek depositors will be forced into ceding up to 30% of their money to the central bank in a gigantic haircut.  The ECB has indicated that it will no longer finance the run on Greek banks that has siphoned cash out of the system, and in order to recapitalize them, depositors must pay part of the price.

But the immediate worry is what the EU leaders will do and what the ECB is prepared to do in order to prevent the unprecedented chaos of a meltdown.  No modern society has ever experienced what Greece is about to experience, and no one knows if the tenuous bonds of civilization will hold under the enormous pressure of a financial collapse.