Merkel holds crisis meetings on looming Athens default

Chancellor Angela Merkel will hold emergency meetings today with German political party leaders, and parliamentarians of her Christian Democratic Union (CDU), as Greek finance minister Yanis Varoufakis said the German leader "holds the keys" to solving the high-stakes standoff.

But his German counterpart, Wolfgang Schäuble, believes a Greek default on Tuesday is all but inevitable after what he called the “perplexing and depressing” Greek referendum decision. Asked if he saw any chance of Greek avoiding a slip into default, when €1.6 billion in IMF loans are due on Tuesday, he said: “I don’t think so”.

“It was incredibly ambitious as it was,” said a visibly exhausted Wolfgang Schäuble about the last weeks of high-stakes talks.

After the shock of the referendum announcement lifted, however, it was clear that players on all sides believe the Greek crisis drama has one last act to play out.

Asked if the game was over with Greece, Dr Schäuble said: "It depends on the Greeks, but with the confusing politics from Mr Tsipras it's become a lot more difficult."

Echoing his remarks, Dr Schäuble's Greek counterpart, Yanis Varoufakis, tells the Bild tabloid today that Athens "remains open for new proposals", once they are "significantly better" than those already on offer.

Germany is the largest contributor to the Greek bailout programmes, and stands to lose an estimated €80 billion should the programmes break down. Mr Varoufakis said that Angela Merkel, as leader of Europe's most important country, "holds the keys in her hands" to resolving the standoff.

Referendum proposa

l “I hope she uses them,” he said. Defending the July 5th referendum proposal, he said Athens couldn’t accept it but couldn’t reject it given the importance for Greece’s future either.

“So we decided to turn to the citizens: to explain our negative position but to let them decide,” said Mr Varoufakis.

Whether Greece even gets that far remains a moot point. Dr Schäuble has ruled out any Bundestag vote to bridge the gap between Tuesday's IMF deadline and the Greek referendum six days later. It was not credible, he said, to believe the Greek government would commit to a programme it had campaigned against.

“I cannot make a decision at such a cost to German taxpayers,” he said.

Refusing such a vote is a matter of political survival for the Christian Democratic Union-led coalition in Berlin, with opposition growing in its own ranks to further assistance for Greece. A successful Bundestag vote for an extension of the second programme or even a third programme is seen as increasingly unlikely.

Dr Schäuble played down the long-term cost to Germany of non-repayment of Greek loans, saying they were financed over such a long-term, at low interest rates and would eventually be restructured.

As Sunday wore on, it was clear that a mood was growing that the door was not quite closed to Greece. French prime minister Manuel Valls told French television stations: "A deal is still possible – I invite the Greek government to come back to the negotiation table. I cannot resign myself to Greece leaving the euro zone . . . We must find a solution."

Austrian finance minister Hans Jörg Schelling told Die Presse daily that Greece was hurtling towards a default but that not servicing its IMF loans would not automatically mean its exit from the euro.

"One can't leave the currency union, one can leave the European Union, " he said. "For that, Greece has to file an application, the other countries have to ratify the exit application. Only then, most likely, can Greece leave the euro zone."

Despite hardening German political opinion towards Greece, politicians in Berlin continue to send mixed signals about the matter. Dr Schäuble was reminded over the weekend that, just last month, he backed the idea of a Greek referendum on new reform proposals. Similarly, Social Democrat (SPD) leader Sigmar Gabriel, deputy chancellor in Berlin, welcomed the referendum idea on Saturday as a chance to settle the crisis once and for all.

In today's Süddeutsche Zeitung, however, he said he was "appalled" that the Greeks had turned down an "accommodating offer" from creditors.

SPD foreign minister Frank-Walter Steinmeier said he was “speechless” at the “zig-zag course of the Greek government” and condemned the Athens government for urging its people to reject the EU-IMF reform proposals. The Syriza-lead government was taking its people “hostage”, he said, in a bid to “wring further discussions from Europe”.

After an SPD steering committee telephone conference on Sunday morning, a participant described the atmosphere among leading party officials as “general outrage”.

Outrage and wit

Germany’s media reacted on Sunday with a mixture of outrage and sardonic wit to the Greek referendum proposal.

"Tsipras, that's enough!" headlined Bild am Sonntag tabloid, a voice that is stridently critical of Greece in the media landscape. "Under the burden of home-made crises, the basis of Europe is crumbling its solidarity."

The Cicero political magazine ran an online cartoon of Chancellor Angela Merkel holding up a two-sided sign. On one side, "I'm against a Grexit . . .", on the other " . . . as long as it could look like I'm responsible for it."

Back on German television, Wolfgang Schäuble insisted that a possible Grexit would make the remaining members of the currency union “even more determined” to ensure the euro “will not be a fluid” construct, under pressure from finance markets.