Greek debt crisis

Greece's politcal parties give written asurances to back PM in negotiations with creditors

Eoin Burke-Kennedy Mon, Jul 6
 
LIVE: Greek debt crisis

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  • 07:23
    The morning after the night before, and we awake to find Yanis Varoufakis, Greece's charismatic finance minister, has resigned. Perhaps the most unexpected casualty of yesterday's vote, he was the man who, alongside prime minister Alexis Tsipras, aggressively defended Greece's position in the face of huge pressure from creditors. His decision to go comes after yesterday's resounding No vote, putting Greece once again in uncharted waters.

    In a short statement, Varoufakis said he had been "made aware" that some members of the euro zone 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."

    "I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday's referendum," Varoufakis said. "And I shall wear the creditors' loathing with pride."  

    By way of a late intro, I'm Eoin Burke-Kennedy and I'll be manning our Greek live blog again today.

  • 07:25
  • 07:37
    European markets expected to open 2% down: We're expecting a major sell-off on European markets later this morning following yesterday's vote. Asian stocks hit a six-month low overnight while the euro tumbled in the wake of the Greek vote against austerity.

    A "rush from risk" took MSCI's broadest index of Asia-Pacific shares outside Japan down 2.8 per cent in the steepest daily drop in two years. Japan's Nikkei shed 2.4 per cent, while US equity futures dropped 1.3 per cent. Early signs were the major European bourses would open down at least 2 per cent.

    The euro was down 0.8 per cent at $1.1027 but above an early low of $1.0967. It lost more ground to the safe-haven yen, reaching 134.76 yen from Friday's 136.18.
  • 07:40
    Aντίο, as they say in Athens
    Aντίο, as they say in Athens
  • 07:47

    London Editor, Mark Hennessy writes:

    The Greek people has given “a decisive view” in yesterday’s referendum, No 10 Downing Street has said this morning, just hours before British prime minister David Cameron meets with advisers and ministers to discuss the implications of the vote for the United Kingdom.

    “This is a critical moment in the economic crisis in Greece. We will continue to do whatever is necessary to protect our economic security at this uncertain time. We have already got contingency plans in place and later this morning the Prime Minister will chair a further meeting to review those plans in light of yesterday’s result,” said a spokesman.

  • 07:50
    All eyes will be on Frankfurt again today. The ECB, which holds a conference call later this morning, is likely to maintain emergency funding for Greek banks at its current restricted level, sources claim.

    The Greek government has denied there are plans afoot to issue a parallel currency or some kind of IOU arrangement but some commentators are saying they may have no choice.
  • 07:51
  • 07:53
  • 07:58
    By the way, we ended late last night but not late enough to get the official result. With 100 per cent of votes counted, the No side has a resounding 61.31 per cent with the Yes camp on 38.69 per cent. Voter turnout was 62.5 per cent. A full set of results can be viewed here
  • 08:04
    Peripheral bond yields drift up:   Yields on government bonds in Spain, Italy and Portugal are moving up following the Greek No vote. Similar to last week, Irish bond yields appear to have decoupled from the periphery and are shifting in the other direction, contracting marginally.
  • 08:08
    Market reaction so far: Though we're expecting pretty steep falls this morning, many investors remarking on how muted the market reaction has been so far. While Europe's currency slid, it only reached a one-week low.

    Price moves have been "muted," according to Standard Chartered. Investors expected a bigger decline, said Mizuho Bank   in Tokyo. The vote won't have a long-term impact on financial markets, according to SMBC Nikko Securities. "The market reaction so far has been remarkably muted," said Callum Henderson, the global head of foreign-exchange research at Standard Chartered in Singapore. "Most people are standing aside and waiting to see how the European authorities will respond."

  • 08:10
    He did break the mould. A European finance minister in leather, on a motorbike?
    He did break the mould. A European finance minister in leather, on a motorbike?
  • 08:17
    European markets open lower. As expected the main European bourses have all opened lower. Germany's Dax opened down 2 per cent, Spain's Ibex is down 2.2 per cent, Italy’s FTSE MIB is 2.8 per cent lower, London's FTSE is down 1 per cent and France’s Cac is down 2 per cent.
  • 08:21
    Bank shares bearing the brunt of the Greek fallout. Italian banks including Unicredit were down 3 to 4 per cent while Portugal's Banco Comercial Portugues fell 3 per cent. Deutsche Bank opened down 2.7 per cent while Santander fell 2.6 per cent.
  • 08:26
    China crisis: Running in parallel to the Greek fallout is a full-blown crash that was threatening to destabilise the world’s second-biggest economy, China.

    In an extraordinary weekend of policy moves, Reuters reports brokerages and fund managers vowed to buy massive amounts of stocks, helped by China’s state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.

    The CSI300 index of the largest listed companies in Shanghai and Shenzhen was up 2.5 per cent, while the Shanghai Composite Index had gained 2.2 per cent, pulling back after an initial burst of euphoria sent them up around 8 per cent when trading began.

    Meanwhile China believes Greece will stay within the euro zone and the region can resolve its current problems, the Foreign Ministry said on Monday.

  • 08:28
    News flash: Greece's chief negotiator Euclid Tsakalotos favourite to become the country's new finance minister, according to government official.
  • 08:30
    Could Euclid be about to replace Yanis?
    Could Euclid be about to replace Yanis?
  • 08:32
    Tsakalotos favourite to succeed Varoufakis: Greece's chief negotiator in aid talks with international creditors, Euclid Tsakalotos, is the government's top candidate to become finance minister following the resignation on Monday of Yanis Varoufakis, a senior government official, cited by Reuters, said. Mr Varoufakis's successor is due to be named after a meeting of political leaders that got under way at 10am.
  • 08:42
    So who is Euclid Tsakalotos? He's an Oxford-educated economist. The 55-year-old, who was born in Rotterdam, currently serves as the chief economic spokesman for the Syriza-led government.

    Since 2010, he has been Prof of Economics at the National and Kapodistrian University of Athens. In 2012, he was elected to Greek parliament for Syriza. So he's more jobbing academic than professional politician.

  • 08:49
    Dublin market follows European peers down: In Dublin, the Iseq is down 57 points at 6,175 with financials the worst-hit. Bank of Ireland is down 2.2 per cent at 35 cents while Permanent TSB is down 3.2 per cent at €4.53

  • 08:50
  • 08:59
    What's most noticable about the market shifts this morning is that they're probably not as bad as they were last Monday just after the referendum was called, albeit it's early days yet.
  • 09:00
  • 09:16
    Stubb: ball is now in Greece's court: Finnish finance minister Alex Stubb, who has taken a hardline against Greece, says negotiations can only be resumed when the Greek Government is willing to co-operate and commit itself to measures to stabilise the country’s public economy and implement the structural reforms required for debt sustainability.

    "The ball is now in Greece’s court," he said in a statement today following the No vote.

    "The near future will be very difficult for Greece. No matter what happens next, the consolidation of the country’s economy will require extensive reforms," Stubb said.

    Noting that euro zone leaders and the Eurogroup would meet to discuss the situation tomorrow, he said: "The instruments and rules for the stabilisation of the euro zone remain unchanged".

  • 09:20
    More on the Varoufakis decision: Questions being asked about whether Varoufakis resigned to help his Tsipras cut a deal or whether he fell victim to internal Syriza politicking.   Jury still out on that one.

    "I was made aware of a certain 'preference' by some Eurogroup participants, and assorted 'partners', for my... 'absence' from its meetings; an idea that the prime minister judged to be potentially helpful to him in reaching an agreement," Varoufakis said in a statement.
  • 09:33
  • 09:45
    There's no market rout and contagion is limited. While shares have fallen and the euro remains weaker, markets are more stable than predicted in the wake of the latest Greek development.

    "The market is, rightly or wrongly, taking a great deal of credence of the fact that the ECB has many more defence mechanisms in place than it did in 2011-12," said Andrew Milligan, head of global strategy at Standard Life Investments. "Some of the measures we've seen already could be seen as a subtle signal by the ECB that it is ready to step up... This point of the ECB being ready to step in is very important to the market reaction we've seen."
  • 09:49
    48 hours to keep Greece in the euro zone: Greek employment minister Rania Antonopoulos said leaving the eurozone would be the “worst possible outcome”. She told BBC Radio 4’s Today programme: “There are still 48 hours, there is still this week. We will push as much as possible for an outcome, a result of these negotiations, that does not obligate Greece to go in that direction.”

    Klaus-Peter Willsch, who sits in the German parliament as a member of Mrs Merkel’s CDU Party, said Greece should leave the euro. He told the programme: “I think it’s not possible that the debtor blackmails the creditor. They try to have a living far beyond the economic possibilities and send the bills for that to other countries’ taxpayers, which is not fair and not a way for the future."
  • 09:51
  • 10:01
    It's probably worth re-stating where yesterday's No vote has left things:

    - Yanis Varoufakis has quit, supposedly to facilitate negotiations
    - Markets, euro down but no rout and contagion is limited
    - We're awaiting an ECB statement regarding Greek banks
    - Merkel travels to Paris later for meeting on Greece with Hollande

  • 10:13

    Tomorrow's scheduled Eurogroup meeting will start at 1pm, we're hearing. Finance ministers are expecting to have a renewed Greek offer on the table by then.

    Varoufakis's exit is expected to smooth negotiations somewhat, but there's nothing on the table as yet and Greek banks are said to be 48 hours away meltdown.

  • 10:33

    Here's what we're expecting to happen this morning. First, the ECB will release a statement taking note of yesterday's vote and affirming it will continue liquidity assistance to Greek banks at the existing level. This means Greece has only 48 hours to cut a deal before the banks run dry. Already, there are unconfirmed reports that Greece's central bank has discussed reducing the €60 ATM withdrawal limit to €20.


    This then puts the pressure back on Syriza - minus Varoufakis - to come up with a new deal for the Eurogroup to work with.


    By the way, this is all conjecture but it's a blog after all.

  • 10:37
  • 10:43
    Conditions for talks with Greece are not in place, German government spokesman Steffen Seibert has said.
  • 10:48
    Customers queue to withdraw cash from an  ATM  outside an Alpha Bank AE bank branch in Athens
    Customers queue to withdraw cash from an ATM outside an Alpha Bank AE bank branch in Athens
  • 10:51

    France tries to keep door open: "There is a risk of (Greece) leaving the euro but there is no automatic exit, in the same way that the vote doesn't mean automatically that Greece stays in the euro. What will determine whether it stays or leaves is the quality of negotiations that will start," French finance minister Michel Sapin said earlier today.

    "If having won back their pride they can return to negotiations, so much the better ... "It is up to the Greek government to make proposals now," he told Europe 1 radio.

  • 10:55
  • 11:06
  • 11:24
    Time for a market update: as expected all major European bourses are down but perhaps not by as much as was expected following yesterday's No vote. Germany's Dax is down 0.77 per cent, France's Cac 40 is down 0.86 per cent while   London's FTSE fell 0.32 per cent.

    In Dublin, the Iseq is down 0.8 per cent at 6,180 with Bank of Ireland and Permanent TSB leading the retreat.

    The euro lost half a per cent to $1.1064 and 0.6 per cent against the safe-haven Japanese yen. It fell as low as $1.0967 in Asia before rebounding, which pundits linked to the resignation of Greece's finance minister, Yanis Varoufakis.

    Yields on Italian, Spanish and Portuguese government   bonds rose between 5 and 8 basis points. German 10-year yields fell 5.3 points to 0.75 per cent. The yield gap between Italian and German 10-year bonds, at 158 bps, was below last Monday's eight-month high, which followed the collapse of talks between Greece and euro zone leaders.

    Yields on Irish 10-year bonds hovered around 1.6 per cent, flat on the day.

  • 11:27
  • 11:34
    Journalists follow outgoing Greece finance minister Yanis Varoufakis for a statement following his surprise resignation
    Journalists follow outgoing Greece finance minister Yanis Varoufakis for a statement following his surprise resignation
  • 11:37
    Valdis Dombrovskis, European Commission vice-president, debunks rumours European leaders sought to suppress IMF report on Greek debt
  • 11:47
    At the moment, we've got a series of dispatches from various European leaders/ministers/advisors, while we wait for the next big move, which could be a statement from the ECB or a new finance minister in Greece.
  • 11:56
    Paddy Power has an uncanny ability to insinuate itself into the big events of the day. Their aggressive marketeers are today tooting about having paid out on both sides of the Greek referendum, a five-figure sum, no less.

    "Paddy Power is feeling a little red faced this morning after calling the Greek referendum wildly wrong," the company said today.

    It is offering 5/4 for Greece to exit the euro region this year, and 4/7 for the nation to keep the euro this year.
  • 12:01
    Nowotny says No vote does not make it easy for ECB: ECB Governing Council member Ewald Nowotny says the latest developments in Greece have not made it easier for the European Central Bank to change its stance on emergency funding, according to Bloomberg. The ECB approves the provision of emergency liquidity for Greek banks but froze it one week ago, leading to the imposition of a €60-a-day limit on cash withdrawals and the closure of banks.

    "I am convinced that what we've done so far is right and conforms with our rules. But one has to make new decisions every time. The development in Greece does not make this easier for us, I'm afraid," Nowotny, who also heads Austria's central bank, told ORF radio, commenting on the provision of Emergency Liquidity Assistance (ELA). "It has become apparent that Greek banks have a tendency to run out of liquidity," he said, adding, however: "One cannot keep banks shut indefinitely."

  • 12:12
    A woman withdraws money from an ATM machine while others speak to an official of the bank, in Athens
    A woman withdraws money from an ATM machine while others speak to an official of the bank, in Athens
  • 12:35
    The word "endgame" has fallen victim to the Greek crisis. It is now almost meaningless. When the endgame of this six-year long saga finally arrives is now probably best left to historians. We've been in the last-ditch, eleventh hour, last-gasp saloon with Greece for months, perhaps even years, but there's always extra time and we never quite get to a penalty shoot-out. Maybe this is how the European Union operates, like a worker who can't get going until the deadline looms.
  • 12:37
  • 12:46
    Grexit now the base case for economists: The No vote has apparently tipped Grexit into being the base case for analysts - meaning the most likely event. A Reuters poll of more than 70 economists published a week ago, just before Greece defaulted on a 1.6 billion euro payment to the International Monetary Fund, placed the median probability of Greece leaving the euro zone at 45 per cent.

    Since then, BNP Paribas, JP Morgan, RBS, Barclays and Societe Generale, among others, have revised their forecasts for
    Greece to remain in the euro zone and are now expecting it to leave. Other banks, like Investec, have flagged it as a serious risk that may soon become the most likely outcome.

    While few put an exact figure on the probability, that suggests the consensus has now risen above 50 per cent, at least among large international bond dealers. "We argue that EMU (European Monetary Union) exit now is the most likely scenario," wrote economists at Barclays in a note, even before the final referendum results were in.
  • 12:50
  • 12:55
  • 12:58

    Dijsselbloem: No vote makes things more difficult

    Reuters is reporting on comments from Eurogroup chief Jeroen Dijsselbloem: The Greek referendum has made discussions with its creditors more difficult, he told reporters, but he expressed hope that the process could be saved.

    "It doesn't bring us closer to a solution right away. In fact, when proposals are rejected that only makes things more difficult." Heading into a Dutch government meeting to discuss the 'No' vote in Greece on Sunday, Dijsselbloem said keeping Greece in the euro zone "is still their objective and mine."

  • 13:03
    Homeless sleep on the ground in central Athens
    Homeless sleep on the ground in central Athens
  • 13:12
    German finance ministry spokesman Martin Jaeger pours cold water on prospect of debt write-down
  • 13:38
  • 13:46
    Bloomberg is reporting that Russian president Vladimir Putin and Greek PM Alexis Tsipras discussed the referendum in
    Greece that rejected further austerity measures, as the Kremlin urged compromise between the European Union member and its creditors. Putin "expressed his support to the people of Greece in overcoming the difficulties facing the country," the Kremlin said in an e-mailed statement on Monday.
  • 13:49
  • 13:50
  • 13:59


    Tsipras to present deal proposal tomorrow: Ok finally a bit of breaking news. After a phone call with Merkel and four hours of discussion with his own cabinet, Greek PM Alexis Tsipras is apparently ready to present a Greek proposal for a deal at Tuesday's European Union summit.

    Commentators are suggesting the deal will take the form of Juncker's last offer.

  • 14:01
  • 14:13
    Lunchtime recap: After five months, Greece's cavalier finance minister Yanis Varoufakis is gone, probably to make way for Euclid Tsakalotos. Varoufakis's exit was supposedly to make way for a deal.

    After yesterday's resounding No vote, the Greek government has been in talks for four hours today to decide its next move. There are unconfirmed reports that Greek PM Alexis Tsipras has agreed to present proposals at breaking the impasse at tomorrow's euro zone meeting following a phone call with German chancellor Angela Merkel. The proposals are said to be close to the European Commission's latest offer.

    The European Central Bank will hold a conference call later to discuss the emergency liquidity assistance to Greece, amid reports that Greek banks have 48 hours to secure more funding or face implosion. There are also reports that the central bank in Athens is considering dropping the €60 withdrawal limit to €20.

    Markets are all down following yesterday's rejection of bailout terms by Greece, albeit by less than expected. The
    euro is trading down 0.8 per cent at $1.1030, having declined as much as 1.3 per cent to reach $1.0970 initially.
  • 14:22
    Wall Street Journal has an interesting take on the Varoufakis resignation. According to its report, it was an ill-chosen remark made to the UK's Telegraph that did him in.
  • 14:25

    Varoufakis gives strong hint on who will replace him: Greece's outgoing finance minister Yanis Varoufakis on Monday strongly hinted that bailout negotiator   Euclid Tsakalotos would take over as finance minister, saying the two would return to face reporters together on Tuesday, according to Reuters.

    "I am leaving and I will see you tomorrow with Mr. Tsakalotos," Varoufakis, who resigned earlier on Monday, said as he left the finance ministry. Asked whether Tsakalotos would be the new finance minister, Varoufakis said: "I hope so."

  • 14:34
    Greece to extend bank holiday: The Greek government is about to annouce an extension to the closure of banks beyond Monday by at least a few more days, according to four banking sources, cited by Reuters.

    Last week, the Athens administration introduced capital controls and forced the banks to shut by decree after the European Central Bank froze a vital financial lifeline following the breakdown of bailout talks between Athens and its foreign creditors.

    The decree expires on Monday and the government is expected to issue a new decree to replace it. "The bank holiday will be extended, until Friday or next Monday," one senior banker told Reuters.

  • 14:38
    Greece's former finance minister Yanis Varoufakis drives his motorcyle with his wife Danae Stratou after exiting the finance ministry in Athens
    Greece's former finance minister Yanis Varoufakis drives his motorcyle with his wife Danae Stratou after exiting the finance ministry in Athens
  • 14:46
  • 14:52
    More on the Tsipras/Merkel phone call: 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.
  • 15:12
    US markets fall on Greek vote: The Dow Jones industrial average was down 127.44 points, or 0.72 per cent, at 17,602.67 shortly after opening today, while the S&P 500 was lower 13.98 points, or 0.67 per cent, at 2,062.8 and the Nasdaq Composite was down 34.48 points, or 0.69 percent, at 4,974.73.
  • 15:15
  • 15:26
    Breaking : After six hours of intense negotiations, Greek leaders are preparing to release a statement on how they intend to proceed following Sunday's vote.  

     
  • 15:29
    Greek party leaders to release joint statement, backing Tsipras in upcoming negotiations
  • 15:32
    Greece’s defence minister said three opposition parties, including New Democracy and Pasok, have signed a declaration backing Mr Tsipras in bailout negotiations with creditors, Reuters is reporting.

    That makes a total of five parties behind the prime minister, who already had the support of his own Syriza party and the junior party in the governing coalition, the Independent Greeks.

    Defence minister Panos Kammenos said the support heralded a “new era” in Greek politics and would boost Athens’ chances of reaching a deal with European and international creditors. Mr Tsipras convened a meeting of party leaders today, a day after winning a bailout referendum that rejected creditors’ previous demands.
  • 15:35
    IMF stands ready to assist: We have a brief statement from the International Monetary Fund managing director Christine Lagarde. “The IMF has taken note of yesterday’s referendum held in Greece. We are monitoring the situation closely and stand ready to assist
    Greece if requested to do so.”
  • 15:55

    Market recap: European markets fell around 1.5 per cent on Monday, a relatively calm reaction to the Greek rejection   of austerity. Banks bore the brunt of the sell-off, with the relevant Euro STOXX index touching a five-month low and a raft of Italian banks down 5 to 10 per cent.

    Dublin's Iseq was down 0.77 per cent at 6,185
  • 16:05
    Banks to stay close until at least Friday: According to Reuters, Greece's banks will stay closed at least until Friday as the country tries to reopen bailout negotiations with official creditors and save its financial system from collapse. "The bank holiday will be extended until Friday or next Monday," one senior banker is cited as saying.

  • 16:07

    More on this joint statement:   Leaders of Greece's main ruling and opposition political parties have apparently given written assurances they will back primeminister Alexis Tsipras in talks with creditors, according to the leader of the Government's junior coalition partner said.

    The remarks by right-wing Independence Greeks leader Panos Kammenos followed talks between political leaders at the presidential mansion in Athens, after Greeks on Sunday voted resoundingly to reject the terms of an international aid deal. They were due to issue a joint statement.

  • 16:19
    I'm hanging up my boots for now. For updates on the Greek debt crisis, go here