Germany continues to play hardball as Greek crisis worsens by the day

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Germany maintained a hard stance line on  Athens, a day after Greek voters rejected a bailout deal from its creditors. But some European nations were more than willing to soften the push for austerity.

The rift among leaders in Europe may jeopardise any new talks, as the Greek government moves to restart talks for a bailout. Moreover, it also adds to the pressure on Greece, which is nearing collapse with its banking system and the government already running haywire.

If a deal is not struck soon, Greece will default this month, on a number of global debts. The situation will turn for the worse as Greece may even face trouble paying civil servants and pensioners.

The nation’s financial state is worsening by the day. As Greek banks faced shortage of cash, European Central Bank decided on 6 July as an extended lifeline, to keep them afloat.

Moving quickly to take advantage of the vote results, Prime Minister Alexis Tsipras has taken first steps toward conciliation with its creditors. At his behest, finance minister, Yanis Varoufakis has resigned and was replaced by Euclid Tsakalotos, an economist.

At a six-hour meeting, the leaders of Greece’s five main political parties issued a statement saying they wanted the talks to include a discussion of relief from Greece’s debt load — a key sticking point with creditors.

In return, Greece would deliver “reforms based on distribution of burden and promotion of growth with smallest recessionary impact,” they said. However, Germany, the nation to which Greece owes the most money, remained resistant.

But Berlin saw no new basis for talks of negotiations with Athens, at this point. The spokesman for Angela Merkel, Germany’s chancellor, said, while Greece was still in the eurozone, it was up to it to determine whether Greece would stay.

Despite Germany’s stance, other leaders seemed eager to avoid the spectre of a Greek exit from the euro. Though officials in France and Brussels were unhappy with the vote, but they held the door open to a possibility of a compromise.

At a news conference in Brussels on 6 July, European Commission’s vice president for euro affairs, Valdis Dombrovskis, said the vote would “weaken” Greece’s position with creditors.

In France, finance minister, Michel Sapin said, France could support Greece’s debt relief if Tsipras proposed a new bailout package. He said this before a meeting between French President François Hollande and German Chancellor Angela Merkel to discuss how to deal with Greece.

Both leaders called on Greece to submit proposals to avoid a possible exit from the eurozone. The Greek government, said Tsipras and Merkel agreed, would present new debt proposals on 7 July, when eurozone leaders meet in Brussels.

Meanwhile, Greece’s fiscal situation is worsening. The banks could limp along for a few more weeks, but ultimately cannot avoid to face a crisis of sorts by this month end if the government doesn’t pay €3.5 billion on bonds held by ECB by July 20. If it doesn’t pay, the ECB would signal the Greek government bankrupt and drag the banks down. The decision was a sign that it was worried about losses it will suffer if Greek banks fail.

However, people continue to use debit and credit cards and make electronic transfers within Greece. But sources said many merchants insist on cash, in part because they are not sure their money is safe in a bank.

Without a banking system serving as a conduit for euros and a platform for transactions, Greece might have no choice but to print its own currency.

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