ATHENS – European leaders weighed their next steps Monday after Greece’s landslide rejection of bailout proposals and signs the emboldened government would now seek a new bid to reopen financial lifelines without its firebrand finance minister in the mix.
The resounding victory Sunday for Greeks who said “no” to European austerity demands – 61 percent in all – gave a much-needed boost to Greece’s battle-scarred leftist leaders.
But European leaders – in control of the funds that have kept Greece afloat – gave no immediate indication they would rush to make a deal even with Greece’s banks still closed and teetering on the edge of insolvency.
With cash dwindling in his nation’s ATMs, Greek Prime Minister Alexis Tsipras convened an emergency meeting of leaders from the country’s main political parties after Finance Minister Yanis Varoufakis announced his resignation.
Varoufakis, whose unbending style and angry denunciations of European economic “terrorism” earned him the enmity of nearly all the country’s creditors, said he was leaving to pave the way for a possible deal.
“I shall wear the creditors’ loathing with pride,” Varoufakis wrote with typical bravado.
He was replaced with another figure well known to European negotiators: the international economic affairs minister, Euclid Tsakalotos, who had taken a leading role in the talks for months.
But little movement on the crisis is expected before Tuesday at the earliest, when leaders of the 19-nation eurozone convene – a week after Greece became the first developed country to miss a repayment to the International Monetary Fund.
At the meeting, Tsipras also is expected to outline new proposals to a tough audience: seeking to convince European partners that Greece can be trusted to trim its spending and get fresh bailout funds in return.
No path is yet clear, but the Greek vote sharply raised the chances that the trust gap is too big and the country could be pushed out of the common currency.
European leaders awaited a new bailout proposal from the Greeks ahead of the Tuesday summit.
Some major euro nations, including France and Spain, appeared to be softening their previous attitudes that a “no” vote was equated with walking papers from the euro zone.
But other leaders, especially in powerful Germany, were taking a hard line, and many analysts still harbored deep doubts about Greece’s ability to stay in the eurozone.
German Deputy Chancellor Sigmar Gabriel said in Berlin that European leaders needed to prepare humanitarian aid of food and medicine for Greece, a dire warning about how close the Mediterranean nation is to full-blown shortages.
He further warned that any new bailout would likely be harsher than the terms of the previous one, a vow that is unlikely to go down well in Athens.
It is clear that “the outcome of the referendum is a rejection of the rules of the economic and monetary union,” Gabriel said. “We cannot simply pretend that nothing has happened.”
In more ominous signals for Greece, a spokesman for the German Finance Ministry rejected any debt relief, a key demand of Greek leaders.
Tsipras and his backers argue that the country is suffocating under an unsustainable debt pile that will crimp growth for years – an assessment that has received some support from the IMF.
German Chancellor Angela Merkel will meet French President François Hollande Monday evening to discuss their plans. Other European leaders also sounded gloomy about the prospects for a deal.
“The outcome of the referendum certainly has made things more complicated,” said European Commission Vice President Valdis Dombrovskis. “There are going to be very few winners in this situation.”
In Washington, White House spokesman Josh Earnest urged European leaders to seek a framework that allows Greece to remain in the euro zone, but noted that “significant differences” stand in the way.
Global markets have see-sawed over the past weeks as the Greek showdown unfolded. On Monday, the euro lost ground, and Asian and European exchanges were down, but there were no signs of a panicked sell-off. Wall Street also was down.
One key test is ahead. The European Central Bank is expected to decide whether to continue the emergency tap that keeps Greek banks from running dry.
Few analysts believed that the ECB would pull the plug entirely ahead of the Tuesday meetings. But even a status-quo decision to hold the credit line flat at $98 billion could leave the banks penniless as early as Tuesday.
Tsipras called the referendum a little over a week ago, gambling that voters would back him in his rejection of Europe’s latest cash-for-cuts deal and give him leverage to win a better offer.
Analysts were generally downbeat about prospects for a deal. Malcolm Barr of JPMorgan Chase wrote in a research note that “Greek exit from the euro appears more likely than not.”
Nick Malkoutzis, an analyst with the website Macropolis, rated the chances of an agreement any time in the near future as “very slim.”
But he also said that Europe will feel pressure to reopen serious talks. “It would be a really damaging precedent for leaders to refuse to enter negotiations after a democratic vote in a member country,” he said.
Time is short. Greece owes billions of euros to its creditors on July 20, but the country is broke.
Greek opposition leaders also pushed for a quick deal – and said the government will be held to account if it fails to achieve one.
“If there is no agreement within 48 hours, we will reply to them harshly on Wednesday,” said Vangelis Meimarakis, a former speaker of parliament who is a member of the opposition New Democracy Party.
Other Greeks despaired that the country had faced an impossible choice, with no reasonable hope that conditions would improve.
Roumpini Terzaki, who runs a charity that helps 5,000 needy families, said the organization had faced shortages of food and medicine last week for the first time in its history.
“People are going hungry. It’s like an earthquake everywhere,” she said. “If we have a ‘no’ on Monday or a ‘yes’ on Monday, the situation will be exactly the same.”
Brian Murphy in Washington contributed to this report.
