Greece’s government has lost no time in following up on a emphatic rejection of its creditors’ terms for further assistance Sunday, replacing its controversial finance minister in an effort to rebuild the bridges with Europe that it spent most of last week burning.
Yanis Varoufakis, whose working relationship with his counterparts had broken down completely, announced Monday he would resign immediately, but it is unclear how much that will appease the creditors, since there has been little difference between him and Prime Minister Alexis Tsipras on the major policy issues.
“Soon after the announcement of the referendum results, 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. For this reason I am leaving the Ministry of Finance today,” Varoufakis said in one last flourish on his blog. “I shall wear the creditors’ loathing with pride.”
Tsipras is holding a meeting with the leadership of all the main parties Monday morning in Athens and is due to make an announcement later.
All eyes are focused now on Paris, where French President Francois Hollande is due to receive German Chancellor Angela Merkel for talks. Neither leader has commented yet, but there are clear rifts between the Eurozone’s two largest and most powerful states at lower level, with German politicians pushing for Greece to leave the Eurozone, while French ones were more keen to resume talks and keep it in.
Finance Minister Michel Sapin told Europe 1 radio station that a Greek exit from the currency union “isn’t automatic”, and that the Greek government should make new proposals to break the deadlock.
However, Siegmar Gabriel, Germany’s vice-chancellor, said Sunday it was “hard to imagine” any new offer being made. Germany’s finance ministers and many senior lawmakers have urged Greece to leave the Eurozone.
The split between France and Germany is most evident in the pressure their politicians are putting on the European Central Bank, which received a request from the Greek central bank to increase the emergency lending assistance to four large banks, according to Reuters. The Germans are dead set against (many would like to see the ECB pull the plug immediately), but Sapin warned Monday that the lifeline mustn’t be cut.
Germany has a key ally in Spain, which doesn’t want to give its own radical left party, Podemos, any encouragement ahead of elections later this year. However, Italy, the Eurozone’s third-largest economy, is more sympathetic towards the Greeks, having more to lose from a fresh bout of market volatility.
The banks are almost out of euros after a week of heavy deposit outflows, despite a nationwide daily withdrawal limit of €60. Some will cut that to €20 Monday, according to local media reports.
The ECB’s leadership has been deafeningly silent since the referendum, in which Greeks voted against the creditors’ terms for aid by a margin of nearly two-to-one. It’s likely to keep its counsel until Tuesday night, after a meeting of the Eurogroup–the Eurozone’s 19 finance ministers. The group’s hawkish chairman Jeroen Dijsselbloem Sunday said only that “the result is very regrettable for the future of Greece.”