German Chancellor Angela Merkel has long said she wants to see Greece remain in the Eurozone, but “not at any price.” And the Sunday vote by Greeks to reject their creditors' formula for repayment of $270 billion in bailout loans sent that price skyrocketing in both political and economic terms.
Merkel flew to Paris on Monday to consult with French President Francois Hollande on a new approach to Greece’s debt crisis a day after Greek voters rejected her signature strategy for getting Athens’ finances in order.
As leader of the Eurozone's largest and most influential country, Merkel has been the key architect of Eurozone bailouts that have forced tough austerity measures on Greece in exchange for loans enabling it to remain part of the 19-nation common currency club.
The German chancellor is widely resented in Greece for favoring budget cuts by Athens rather than investment in job creation and growth. At the same time, her support for austerity is applauded by politicians across a wide spectrum in Germany and other prosperous Eurozone states.
The result leaves Merkel confronted with competing pressures: Holding the Greeks’ feet to the fire means risking the first failure of the European Union’s common currency experiment, which would mar her otherwise vaunted tenure as its de facto leader.
Merkel and Hollande issued a brief statement after their meeting, revealing divergent views on how best to remedy Greece’s grave economic crisis. Both called for swift resolution of the dispute between Athens and its creditors, but Hollande urged “solidarity” with the struggling Greeks while Merkel called on them to take “responsibility” and reform their taxing and spending habits.
During five years of imposed austerity, the Greek economy has contracted by 25%, and more than a quarter of the working-age population is unemployed. Grinding poverty and an eroding social safety net induced voters to reject their creditors' demands for more belt-tightening with a 61% “no” vote in Sunday's referendum.
Greek Prime Minister Alexis Tsipras, whose leftist government had urged voters to say no to more austerity, spoke with Merkel by telephone Monday and said he would bring new proposals to an emergency meeting of the Eurozone finance ministers in Brussels on Tuesday, a Greek government official told reporters in Athens.
But with both voters and the government having spurned what was presented as a final offer by the major creditors — the European Central Bank, the International Monetary Fund and the European Commission — many European leaders believe there is nothing left to talk about.
Merkel’s spokesman, Steffen Seibert, told reporters at a Berlin news conference that the chancellor “takes notice” of the rejection and respects it as the will of the voters.
“However, in light of the decision by the Greek citizens, the conditions to start negotiations on a new aid program are not met yet,” Seibert said, adding that Berlin would “wait and see what the Greek government makes of it.”
Seibert said the German government was “stressing the principle that solidarity is inseparable from [a country's] own efforts,” implying that the attempt by Athens to get a significant write-down on its debts was not in the offing.
Those in the Eurozone who support holding Greece to its previous commitments exuded frustration and showed signs of losing patience after the referendum.
Though Merkel may be reluctant to see the integrity of the Eurozone breached, her conservative colleagues in the grand coalition that governs Germany are of the view that the Greek “no” vote may well be a prelude to the country's exit from the Eurozone — a “Grexit,” as it has become known.
The referendum was a clear signal that Athens refuses to be beholden to its creditors, said Markus Ferber, who oversees euro policy for the Christian Social Union, the Bavarian sister party to Merkel's Christian Democratic Union.
“The country and the government have knocked away the helping hand” of their Eurozone colleagues, Ferber said. “The only chance for Greece now is to leave the euro.”
The Economist Intelligence Unit, an independent forecasting and advisory service of the Economist Group, put the chances of a Greek exit from the Eurozone at 60%.
Opposition political forces in Germany also signaled readiness to interpret the referendum result as a rejection of what is required to stay in the Eurozone, even if many Greeks voted “no” because their leaders suggested it would compel the creditors to offer a substantial debt write-off and more lenient plan for repaying the rest.
“Now Merkel and the others [of the European creditors] must organize a Grexit, with all the cushions and upheavals that will result as a consequence,” said Alexander Graf Lambsdorff of the Free Democratic Party, one of the German politicians willing to take no for an answer even if that wasn’t what many Greeks meant.
Special correspondent Hassan reported from Berlin and Los Angeles Times staff writer Williams from Los Angeles.
Follow @cjwilliamslat on Twitter for the latest international news 24/7.