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01/10/2016

Greek ‘No’ inflicts heavy blow on EU

Euro & Finance

Greek ‘No’ inflicts heavy blow on EU

"No" supporters celebrate the referendum results. [Reuters]

EU leaders will have a lot of soul searching to do today, following the victory by the “No” camp in the Greek referendum on Sunday (5 July), which rejected their proposed rescue package.

A eurozone summit on Tuesday (7 July) will look into the fallout of the vote.

In Athens, thousands of jubilant Greeks waving flags and lighting fireworks poured into the city’s Syntagma Square, as official figures showed 61% of Greek voters had rejected a deal the two sides had been close to reaching on 26 June.

You made a very brave choice,” Prime Minister Alexis Tsipras said in a televised address. “The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution.”

During his campaign, Tsipras had been saying that a “No” vote would strengthen the Greek negotiating position and that he would go to Brussels the day after the referendum and sign a good deal for the country.

However, international creditors say that their offers are no longer on the table and that Greece, whose economic situation has further deteriorated, would have to negotiate a new arrangement from scratch.

Greek banks remain closed and the available liquidity is barely enough to suffice for a few days. Greeks can withdraw a maximum of €60 a day from ATMs.

The vote leaves Athens in uncharted waters, risking a banking collapse that could force it out of the eurozone.

The 60-40 margin of defeat for the terms of a cash-for-reform deal, which the leftist Greek government rejected a week ago, shocked EU officials, who had been heartened by opinion polls showing the “Yes” camp gaining ground as bank closures and the rationing of cash withdrawals began to bite.

German Chancellor Angela Merkel and French President François Hollande agreed in a phone conversation “that the Greek vote has to be respected”.

According to a German government spokesman, both politicians spoke in favour of a special eurozone summit on Tuesday (7 July). Council President Donald Tusk, who was tasked with convening the summit, tweeted a couple of hours later that it would start at 6PM CET on Tuesday.

Merkel will travel to Paris this evening to confer with Hollande on the consequences of the referendum.

The “No” vote is a personal blow for European Commission President Jean-Claude Juncker, one of the architects of the euro, who worked for months to try to broker a debt deal with Tsipras despite misgivings in Berlin, and who called on the Greeks to vote “Yes”.

>>Read: Juncker asks the Greeks to vote yes for Europe

The European Commission said in a brief statement that it “takes note of and respects” the referendum result.

There was a thunderous silence from top EU policymakers in Brussels and Frankfurt, who conferred by telephone but avoided public appearances to comment on an outcome, which was a stunning setback for EU governments but delighted eurosceptics, as well as the pro-European left, who want a more social union.

Martin Schulz, the European Parliament President, expressed his pessimism regarding Greece’s future and warned of a humanitarian crisis in the country.

“This is a difficult day: there’s a broad majority in Greece, and the promise of Prime Minister Tsipras to the Greek people that with the “No” vote, the position of Greece for negotiating a better deal would become better is, in my eyes, not true…” he said, adding that the EU should start preparing a humanitarian aid programme for Greece.

Should Greece stay?

Hours before the referendum result became known, Schulz said that a “No” vote victory would mean that Greece would have to abandon the euro and introduce another currency.

Jeroen Dijsselbloem, chairman of the Eurogroup of finance ministers of the currency bloc, said in a letter to his Dutch Labour Party members before the vote: “Although the government in Athens would like people to think otherwise, it is about the question of whether Greece stays in the eurozone or not.”

After the referendum, Dijsselbloem issued a statement in which he called the referendum result “very regrettable for the future of Greece”. “For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July,” Dijsselbloem wrote.

But the most devastating reaction came from the German Vice Chancellor and SPD leader Sigmar Gabriel.

Speaking to Berlin’s Tagesspiegel newspaper, Gabriel said negotiations about a new bailout program are “hardly imaginable“ after Greek’s overwhelming referendum “No” at the referendum.

According to Gabriel, Tsipras had persuaded his people that a “No” would strengthen Greece’s bargaining position.  But in fact, Greece’s Prime Minister had “torn down (the) last bridges” over which Europe and Greece could have moved towards a compromise, Gabriel said.

Manfred Weber, the leader of the centre-right European People’s Party tweeted that his political force would stay with the Greek people “whether inside or outside” the eurozone.

Varoufakis resigns

In a sign that the Syriza-led government might change its negotiating tactics with the creditors, Greece’s firebrand finance minister Yanis Varoufakis resigned this morning.

In a statement, Varoufakis said he had been “made aware” that some members of the eurozone considered him unwelcome at meetings of finance ministers, “an idea 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.”

Just ahead of the referendum, Varoufakis had called the creditors “terrorists”, saying they were trying to intimidate voters by capping the amount Greek banks can borrow, which has led to desperate queues for cash.

“What they’re doing with Greece has a name: terrorism. If Greece crashes, a trillion euros – equivalent to Spain’s GDP – will be lost,” he said.

Varoufakis may have failed in his doomsday prediction, which allowed him so far to taunt the creditors. Markets however have reacted so far quite calmly to the Greek referendum.

Poland’s Finance Minister Mateusz Szczurek said today that he was not surprised by the result of the Greek referendum, and that the first reaction of the financial markets does not seem significant.

He added that the EU’s inability to deal with the Greek crisis is an argument for Poland not to enter the eurozone for now.

Positions

= GERMANY =

In Germany, Chancellor Angela Merkel, said the referendum result should be respected, according to her spokesman.

Her office said Merkel will travel to Paris on Monday afternoon to discuss the result of the Greek referendum with French President François Hollande. "The talks with the French president from 630 p.m. (1630 GMT), and over dinner will be about a common assessment of the situation after the Greek referendum and the continuation of the close German-French cooperation on this subject," said Merkel spokesman Steffen Seibert in a statement.

The ball was now in the Greeks' court, added German Foreign Minister Frank-Walter Steinmeier, a Social Democrat. "First of all we have to accept such a result," Steinmeier told reporters in Vienna as he arrived to join the Iran nuclear talks. "Which (conclusions) are now to be drawn, this is a decision which first and foremost must be made in Greece and that's why the ball is now in Athens' court."

Economy Minister Sigmar Gabriel told the Tagesspiegel that it was hard to imagine talks on a new bailout programme with Greece after the country clearly rejected bailout terms in a referendum.

"With the rejection of the rules of the eurozone ... negotiations about a programme worth billions are barely conceivable," said Gabriel, leader of the Social Democrats (SPD), who share power with Chancellor Angela Merkel's Christian Democrats (CDU).

"Tsipras and his government are leading the Greek people on a path of bitter abandonment and hopelessness," he said, adding Tsipras had "torn down the last bridges on which Greece and Europe could have moved towards a compromise".

Senior lawmakers in Angela Merkel’s conservative bloc spoke firmly: "Now one has to ask the question whether Greece would not be better off outside the eurozone," Hans Michelbach, a member of the Bavarian Christian Social Union told Reuters. "Unfortunately, Greece has chosen a path of isolation."

The heads of two leading German business associations said on Sunday that they saw no way for Greece to remain in the eurozone following the country's resounding rejection of bailout terms in a referendum.

"No, we won't be able to avoid it," Anton Boerner, head of the German exporters association, told Reuters when asked whether a so-called "Grexit" was inevitable.

Georg Fahrenschon, head of the association of German savings banks, said: "With a 'no' vote, the Greek people have spoken out against the foundations and rules of the single currency bloc. As a consequence, Greece should leave the eurozone."

= FRANCE =

In France, the governing Socialist Party struck a more conciliatory tone with Greece, saying negotiations should restart quickly.

French Economy Minister Emmanuel Macron said negotiations should resume with Greece from Monday "no matter what the result" of the referendum. He said Greece and international creditors must find a compromise in the country's debt crisis and not count only on support from the European Central Bank.

Macron said that the Greek crisis had exposed that the eurozone was not integrated enough, a problem that urgently needed to be rectified despite deep reservations in many countries.

"The eurozone cannot last in its current state," he said. "The eurozone has to move towards more integration or become a fixed-rate currency union," Macron told journalists. 

He also warned against punishing Greece similar to what was imposed on Germany after World War I. “Let’s not re-enact the Treaty of Versailles,” he said. “For me, the real question is political, the moment is a political one,” Macron said. The question is “whether for the first time in decades Europe, the eurozone, will shrink. Does Europe no longer have ambition? Or is it simply a technical construction?”

“There is only one solution – negotiation! ” tweeted Jean-Christophe Cambadélis, the leader of the Socialists in the National Assembly.

= ITALY =

In Italy, fears of a contagion are much lower than in 2010, when the first Greek debt crisis broke out.  The eurozone "is capable of coping with a crisis of confidence and possible speculative attacks", a source close to Italy's finance ministry said Sunday. "Uncertainty over Greece's future is bound to cause volatility on the financial markets," the source admitted however, adding that Italy's economy was in recovery but that the eurozone had measures in place to stave off contagion from the Greek debt drama.

Prime Minister Matteo Renzi, said it was "obvious" negotiations would have to resume as of Monday, telling the Rome newspaper Il Messaggero that Greece "cannot end up like this."

But it's equally obvious, he said, that "it's impossible to save Greece without the commitment of the Greek government: reforming pensions, fighting tax evasion, the new labour market all depend on them."

Economy Minister Pier Carlo Padoan reacted on Twitter, saying shared rules across Europe could guarantee economic growth and employment, and that Italy would continue to work "for a strong and more integrated Europe".

Foreign Minister Paolo Gentiloni said he hoped an agreement with Greece could still be reached. He tweeted: "Now it is right to start trying for an agreement again. But there is no escape from the Greek labyrinth with a weak Europe that isn't growing."

Italian President Sergio Mattarella meanwhile urged Europeans and EU leaders to show solidarity with Greece and respect the outcome of the referendum after voters looked set to say a resounding 'No' to further austerity.

"Greece is part of Europe, and the other people of the European Union owe its people their solidarity. This will in the coming days be the principle guiding Italy's actions and I hope this will be true also for the representatives of the Greek people, other European partners and the EU's institutions," he said in a statement.

= NETHERLANDS =

Eurogroup chairman Jeroen Dijsselbloem, in a letter to his Dutch Labour Party members before Sunday's vote, warned: "Although the government in Athens would like people to think otherwise, it (the referendum) is about the question of whether Greece stays in the eurozone or not."

= LUXEMBOURG =

In Luxembourg, Prime Minister Xavier Bettel voiced optimism that a solution can be found. "The Greek government has to explain how it sees the way forward, respecting European procedures. Negotiations have not become easier, but Europe is strong and I am confident that we find a solution," Bettel, whose country has just taken over the EU's rotating presidency, said in a statement sent to Reuters

= MALTA =

Maltese Prime Minister Joseph Muscat said people in creditor countries, including Malta, now expected their representatives to protect their interests. "The Greek government sought to protect its people's interest using the method it deemed best. People in creditor countries now expect their representatives to protect their interests and that of the whole European project," Muscat said.

= SLOVAKIA =

Slovak Finance Minister Peter Kazimir said the prospect of Greece leaving the eurozone now looks realistic. "The nightmare of 'euro-architects' that a country could leave the club seems like a realistic scenario after Greece voted 'no'," Kazimir wrote on his Twitter account. "Rejection of reforms by Greece cannot mean that they will get the money easier," he said.

= FINLAND =

Foreign Minister Timo Soini of Finland's eurosceptic Finns Party told his country's MTV television that Greece's future in the eurozone depended on European taxpayers "willingness to pay".

"It cannot be that when they vote in Greece, they vote to have other eurozone members' tax euros for themselves," said Soini, whose country is part of a staunchly pro-austerity club of eurozone members.

= BALTIC STATES =

Lithuania's President Dalia Grybauskaite said the Greek vote has "further complicated the situation", while Estonian Prime Minister Taavi Roivas tweeted: "Does not look good for the future of Greek people..."

Latvian PM Laidmota Straujuma, also on Twitter, wrote that a Greek "No" "will make any further negotiations very difficult". But her spokeswoman Aiva Rozenberga later told AFP that "Europe keeps the door open for negotiations if the Greeks are willing to return".

= RUSSIA =

Russia also weighed in, with deputy economy minister Alexei Likhachev seeing the Mediterranean country -- whose prime minister has been accused of cosying up to President Vladimir Putin -- as having taken "a step towards a eurozone exit".

= EUROPEAN PARLIAMENT & POLITICAL PARTIES =

Sergei Stanishev, President of the Party of European Socialists, said Europe should show solidarity with Greece and make efforts to help it stay in the eurozone.

“It is now high time to bring an end to this crisis. Greek people have suffered terribly throughout the crisis and in particular in the last week: for their sake, and for the future of Europe, all parties must sit together so that stability can be returned to Greece.”

“The vast majority of the Greek people remain committed to Europe. It is obvious that the harsh austerity-only policies of the conservatives have increased inequality, and hurt jobs or growth. As European Socialists, we have been fighting for years for another approach.”

“I remain, as always, opposed to a breakup of the eurozone and Grexit. Trust may have been lost, but there is no choice other than to rebuild it, so that a conclusion may be brought to this difficult period in Europe's history. This requires commitment and reliability from all sides. Europe was built on a spirit of cooperation, compromise, responsibility and trust. That spirit can deliver the balanced deal that can put Greece on an economically sustainable track towards jobs, growth, and equality.”

Rebecca Harms and Philippe Lamberts, the co-Presidents of the Greens in the European Parliament, reacted with amazement at the declarations of Parliament head Martin Schulz.

“The remarks speculating on the outcome of the referendum, hoping for a victory of the 'yes' option followed by Prime Minister Tsipras' resignation and potential replacement of the democratically legitimate Greek government by one run by technocrats is totally inappropriate.”

“Regardless of Mr Schulz's commitment to EU integration and his contributions to finding a solution to the Greek crisis and while we recognize the legitimate frustrations that may have been caused by the attitudes of the stakeholders involved, there can be no justification for the statements in this interview. This is all the more so given Mr Schulz's position as a President of the European Parliament.”

Syed Kamall, the Chairman of the European Conservatives and Reformists (ECR) group in the European Parliament, said the least worst option for Greece was to leave the euro.

“The voice of the Greek people is being heard tonight and it will shake the notion of some European leaders who believe that the peoples of European nations will always blindly vote for further integration and will always take rather than leave the offer on the table.

“There are no easy choices here. There are no winners. The Greek people want to be able to control their own economy and they should be allowed to. But sadly that is not what they signed up to when they joined the Euro. 

“He who pays the piper gets to call the tune. Richer states have to be honest that keeping the euro together will need fiscal transfers to poorer states, but poorer states have to understand the richer states will want to set the rules. 

The Liberals and Democrats (ALDE) group in the European Parliament said it was now up to Tsipras to propose a serious reform package, warning the "No" vote could lead to an “unwanted” Greece exit from the eurozone.

"Tsipras has won the referendum at home, but lost his credibility in the rest of Europe,” said ALDE group leader Guy Verhofstadt. “He has to understand that money for nothing only exists in songs. He has to show he can do more than merely rejecting proposals. This week will determine if Tsipras is a leader who offers solutions or a false prophet without any ideas of his own."

"The Greeks have rejected the bail-out package because it was based on raising taxes and cutting pensions. The "No" vote offers possibilities for real, more in-depth reforms to make the Greek economy competitive again."

"The new reform package should not target the ordinary Greek citizen, but should lay the basis for a fundamental overhaul of the Greek clientelistic society. It should fight the entrenched corruption and radically cut the costs of the government and its immense administration."

"There is more at stake than the future of Greece. It is about the future of Europe. If he shows he is serious and proposes a credible reform package in writing as soon as possible, we should give the negotiations a second chance. A de-escalation period to find a long-term, sustainable deal for Greece and for Europe."

Gabi Zimmer, President of the leftist GUE/NGL group in the European Parliament, which counts the Greek Syriza party among its members, said: “The NO in the referendum means the Greeks are […] saying YES to mandatory negotiations on debt restructuring, including a haircut. They are saying YES to European integration and YES to European democracy.

“You, the Greek people, have rebuffed Schäuble and all those who want to split the eurozone and the EU. You have not been intimidated and have braved the bullying. Thank you to all those people who believe in European democracy and a social Europe. The Greeks have strengthened the position of their government for new negotiations with the creditors. It is time that Merkel and Hollande assume their responsibilities and give primacy to politics and democracy over the rule of neoliberal financial market supporters.”

“Our solidarity is now stronger than ever with the people of Greece, of southern Europe and of all those EU regions which have had to pay the price for those gambling and speculating on the banks and the financial markets."

Eurosceptics were jubilant at the rejection of what French far right National Front leader Marine Le Pen called "the European Union oligarchy".

"It is 'No' vote of freedom, of rebellion against European 'diktats' of those who want to impose the single currency at any price, through the most inhuman and counter-productive austerity," she said in a statement.

In Britain, anti-EU UK Independence Party leader Nigel Farage commended Greek voters for "calling the EU's bluff".

"EU project is now dying. It's fantastic to see the courage of the Greek people in the face of political and economic bullying from Brussels," he said.

Eurosceptics in the Netherlands and Italy joined the chorus of glee at the EU's discomfiture. In Spain, leader of the new far-left Podemos party, Pablo Iglesias, who is close to Tsipras, tweeted: "Today in Greece, democracy has won."