Greek deal ‘could blow euro apart’
Merkel refuses to back down and write off Athens’ debts
GERMANY warned last night that the euro could ‘blow apart’ if the single currency’s members give in to demands from Greece to water down austerity measures.
Angela Merkel and Francois Hollande were locked in a bitter stand-off ahead of yet another bid by eurozone leaders to prevent the debt-ridden state crashing out of the single currency.
Athens yesterday extended its ‘bank holiday’ until at least Thursday after the European Central Bank deferred a decision on whether to continue propping up the country’s financial institutions. But one American hedge fund, Balyasny, yesterday warned investors that Greek banks were on the verge of running dry, leaving the country 48 hours from civil unrest.
In a further signal that Greece’s financial woes could spark a wider geo-political crisis for the West, Greek prime minister Alexis Tsipras yesterday held talks by phone with Russian president Vladimir Putin.
Moscow said the call had been arranged ‘at the request’ of Mr Tsipras, with the two men discussing the outcome of Sunday’s referendum.
Some observers believe Moscow could agree help Greece in return for Athens blocking further EU sanctions against Russia.
France was last night pushing for an EU brokered deal, with Mr Hollande saying it was vital to Europe to show ‘solidarity’ with Greece.
The French president said ‘the door is open’ to further discussions with Mr Tsipras, who is expected to table fresh proposals in Brussels today. But Germany gave no sign it is willing to back down in the face of the Greek referendum on Sunday, when voters overwhelmingly rejected the austerity measures demanded as a condition of future bailout funds.
Mrs Merkel said the conditions for a deal ‘are not there yet’. She added: ‘We have already shown a great deal of solidarity to Greece and the latest proposal put forward to them was extremely generous.’
Sigmar Gabriel, the German vicechancellor and economy minister, said there could be no question of writing off Greek debt because other countries that have had loans such as Ireland, Portugal and Spain would demand equal treatment.
‘I really hope that the Greek government – if it wants to enter negotiations again – will accept that the other 18 member states of the euro can’t just go along with an uncondi- tional haircut,’ he said ‘How could we then refuse it to other member states? And what would it mean for the eurozone if we’d do it? It would blow the eurozone apart, for sure.’ In the UK, ministers are pessimistic about the prospects for a deal. David Cameron held talks by phone with Mrs Merkel on the crisis, while George Osborne discussed the issue with International Monetary Fund boss Christine Lagarde. But neither man emerged from the discussions with any indication that a deal is imminent. In the Commons, Mr Osborne said there was now a severe danger that the political talks would be overtaken by the financial realities on the ground. The Chancellor said the chances of a ‘ happy resolution’ were ‘sadly diminished’ by Sunday’s No vote in Greece. He said the crisis would ‘deteriorate rapidly’ unless today’s eurozone meeting signals that a deal is on the cards.
Valdis Dombrovskis, the European Commission vice president responsible for the euro, said a write-down of Greece’s £270billion debt moun- tain was now ‘off the table’ after the referendum.
He said the vote ‘dramatically weakens the negotiating stance of the Greek government’ and ‘makes things more complicated’.
At a briefing in Brussels, he added: ‘The No result unfortunately widens the gap between Greece and other eurozone countries. There is no easy way out of this crisis. Too much time and too many opportu- nities have been lost.’ Mr Dombrovskis also claimed the vote had no legal basis.
Pressure on Greece’s banks last night increased as the European Central Bank toughened the terms of its emergency funding.
The ECB demanded Greeks banks put up more collateral in order to keep the 89billion euro lifeline of Emergency Liquidity Assistance.
Even though the country’s four main banks are expected to meet the new threshold, the decision pushes them closer to the brink as they struggle to replenish cash machines.
Global stock markets slid lower
yesterday as the result of the Greek referendum. shares across europe tumbled and the single currency was hammered amid speculation Greece is on the verge of leaving the euro and readopting the drachma.
Britain’s blue chip companies have now lost £145billion of value since April in a blow to millions of families with savings and pensions.
But holidaymakers heading to the Continent are getting more bang for their buck thanks to the rising value of the pound. sterling rose to above 1.41 euros – up more than 12 per cent on a year ago when £1 was worth less than 1.26 euros.
tory eurosceptics have urged British voters to follow Greece’s lead in standing up to eu ‘bullying’. steve Baker, who leads the Conservatives for Britain campaign, said Greece’s referendum should encourage Britons to ‘be courageous and vote in line with what they think best when the referendum comes’. he added that we have a ‘much stronger economy’ and therefore are ‘much more able to depart from the eu’ than Greece. Comment – Page 16
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