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July 06, 2015

Greece finance minister resigns

Hopes move will lead to renewed negotiations over debt

Greece's outspoken finance minister resigned on Monday, removing a major obstacle to any deal to keep Athens in the euro zone after Greeks voted resoundingly to back the government in rejecting the austerity terms of a bailout.

Yanis Varoufakis, an avowed "erratic Marxist" economist who infuriated euro zone partners with his unconventional style and hectoring lectures, had campaigned for Sunday's sweeping 'No' vote, accusing Greece' creditors of "terrorism".

"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.

His sacrifice, after promising Greeks he would win a better deal within a day of their overwhelming referendum vote, suggested leftist Prime Minister Alexis Tsipras is determined to try to reach a last-ditch compromise with European leaders.

Greece's chief negotiator in aid talks with international creditors, Euclid Tsakalotos, a soft-spoken academic economist, is the frontrunner to become finance minister, a senior government official said. Tsakalotos had already taken over a prominent role with lenders after Varoufakis was sidelined from the talks in April.

Austrian Finance Minister Hans Joerg Schelling, saying out loud what many peers have whispered privately, said he hoped talks with Greece would become easier with Varoufakis gone.

To win any new deal, Greece will have to overcome the distrust of partners, above all Germany, Greece's biggest creditor and the EU's biggest economy, where public opinion has hardened in favor of cutting Greece loose from the euro.

Varoufakis had a particularly acrimonious relationship with Germany's Finance Minister Wolfgang Schaeuble. A German government spokesman, asked about the departure of Varoufakis, told reporters policies mattered more than people.

The door to negotiations with Greece on a new aid program was open but the conditions were not yet met until there were new proposals from Athens, spokesman Steffen Seibert said.


While jubilant Greeks celebrated their national gesture of defiance late into the night, there was gloom in Brussels.

European Commission Vice-President Valdis Dombrovskis told a news conference there was no easy way out of the crisis and the referendum result had widened the gap between Greece and other euro zone countries.

Greek political leaders met at the president's residence at 10 a.m. as a strengthened Tsipras sought to build a national consensus behind his negotiating position.

Tsipras has spoken by telephone to French President Francois Hollande, who is trying to broker an agreement ahead of an emergency euro zone summit on Tuesday. Hollande was due to meet later on Monday with Germany's Chancellor Angela Merkel to seek a joint response from the two biggest euro zone economies.

While France and Italy have emphasized the importance of more talks, German public opinion is running out of patience. Merkel's vice-chancellor, Social Democrat Sigmar Gabriel, said on Sunday that Tsipras had torn down the last bridges of compromise with the euro zone.

A German Finance Ministry spokesman pushed aside Greek demands for a big debt write-down, as the International Monetary Fund said last week may be necessary. He said the IMF was promoting its traditional stance but Europe had opted for solutions other than debt cuts to put countries back on track.

With banks shuttered, cash machines running out of banknotes and sympathy for Athens among EU governments close to exhausted, Greece's fate is largely in the hands of Merkel and the European Central Bank.

The ECB's policymaking governing council was starting a conference call at 1000 GMT (6:00 a.m. EDT) to decide how long to go on keeping Greek banks afloat after the overwhelming rejection of bailout terms that the central bank had helped to shape.

Several people familiar with ECB policy said the central bank would reject a Greek government request to raise the cap on emergency liquidity assistance provided by the Greek central bank and leave the limit unchanged, slowly tightening the noose on the banks but giving them a few more days' air.

Greek bankers were expected to meet the central bank later in the day, banking sources said, amid expectations that the government will have to issue a new decree extending the crippling closure of banks beyond Tuesday.


After five years of economic crisis and mass unemployment, Greek electors voted 61.3 percent 'No' to the bailout conditions rejected by their radical leftist government, casting Greece into the unknown.

"You made a very brave choice," Tsipras said in a televised address as jubilant supporters thronged Athens' central Syntagma Square to celebrate the act of defiance of Europe's political and financial establishment.

"The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution."

The euro tumbled against the dollar on Asian markets after the setback for Europe's monetary union, and European shares and bonds took a hit when markets opened after the weekend. But the losses were contained and there was no sign of serious contagion to other weaker euro zone sovereigns.

Asian stocks suffered the biggest daily fall in two years, partly because of fears over China's economy, but Varoufakis' departure softened the impact in Europe, maintaining a slender hope of a deal to keep Greece in the euro.

Analysts with several major banks including Citi, Barclay's and J.P. Morgan said a "Grexit" from the euro zone was now their most likely scenario.

EU officials said it would be hard to give Greece easier terms, not least because its economy has plunged back into recession since Tsipras' Syriza party won power in January. Public finances were now in a far worse position than when the rejected bailout deal was put together.

But on the streets of Athens, citizens were unrepentant at their defiant vote.

"I voted ‘No’ to austerity; I want this torture to end," said 42-year-old Katerina Sarri, a mother of two manning a Kiosk in Athens.

    "I’m aware that we will suffer for years but I’m still hopeful. I need to know that there is light at the end of tunnel, that the lives of my children will be better," she said.

(Additional reporting by; Writing by Paul Taylor; Editing by Peter Graff)