Business World

Tuesday 25 October 2016

German calls for Grexit mount as EU stunned by 'No' vote

By Paul Taylor and Andreas Rinke

Published 05/07/2015 | 21:55

German Chancellor Angela Merkel
German Chancellor Angela Merkel

FRANCE and Germany called for an emergency summit of euro zone leaders to discuss Greeks' stunning referendum vote on Sunday to reject bailout terms, as calls mounted in Berlin to cut Greece loose from Europe's common currency.

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German Chancellor Angela Merkel's deputy said Athens had wrecked any hope of compromise with its euro zone partners by overwhelmingly rejecting further austerity.

Merkel and French President Francois Hollande conferred by telephone and called for a euro zone summit on Tuesday. They will meet in Paris on Monday afternoon to seek a joint response.

But Vice-Chancellor Sigmar Gabriel, leader of Merkel's centre-left Social Democratic junior coalition partner, said it was hard to conceive of fresh negotiations on lending more billions to Athens after Greeks voted against more austerity.

Leftist Prime Minister Alexis Tsipras had "torn down the last bridges on which Greece and Europe could have moved towards a compromise," Gabriel told the Tagesspiegel daily.

Read more: Greece crisis: Greeks defy Europe with overwhelming 'No' to austerity terms

His comments, saying Greeks had rejected the rules of the euro zone, reflected a mounting public demand in the most powerful EU country, which is also Greece's biggest creditor, to eject Athens from the 19-nation currency area.

It was not clear whether Merkel, who has repeatedly said she wants to keep Greece in the euro zone, would shift to a similarly hard line.

But senior lawmakers in her conservative bloc also spoke firmly: "Now one has to ask the question whether Greece would not be better off outside the euro zone," Hans Michelbach, a member of the Bavarian Christian Social Union told Reuters. "Unfortunately, Greece has chosen a path of isolation."

The vote sharpened differences between Greece's few remaining sympathisers in the euro zone - mostly in Italy and France - and hardline countries led by Germany which are fed up with pouring loans into Greece.

Italy's foreign minister, Paolo Gentiloni, said the euro zone should resume efforts to reach a deal with Athens.

"Now it is right to start trying for an agreement again," he tweeted. "But there is no escape from the Greek labyrinth with a weak Europe that isn't growing."

Read more: Brian Hayes says outline of Greek deal is clear

There was a thunderous silence from top EU policymakers in Brussels and Frankfurt who conferred by telephone but avoided public comment on an outcome that was a stunning setback for euro zone governments but delighted anti-EU populists.

Euro zone officials said there was no immediate plan for an emergency meeting of the 19 finance ministers of the currency area and no clarity about the way forward with Greece.

"No way," a euro zone official said when asked whether the Eurogroup ministers would meet on Monday. "(They) would not know what to discuss."

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."

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.

It was 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.

Deputy finance ministers and senior officials of the Eurogroup Working Group will hold a conference call on Monday to take stock of the situation, another euro zone official said.

Any future negotiation would run up against the hardening of opinion in Germany.

The head of Germany's savings bank association said Greece had broken with the rules of the euro zone and should leave the currency bloc. The head of the German exporters' body said he could not see how Greece could stay in the euro zone now.

Hardline German Finance Minister Wolfgang Schaeuble, denounced in 'No' campaign posters as a blood-sucker, has leaned towards making an example of Greece and pushing it towards the exit, sources familiar with his thinking say.

In a weekend newspaper interview, Schaeuble said Athens might consider leaving the currency area temporarily.

Eurosceptics around the EU 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.


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