Why Greeks reject austerity and vote ‘No’ ?

Yanis Varoufakis quit as Greek finance minister, a move that might go some way to help restart talks with creditors after voters risked Greece’s future in the euro by rejecting further austerity.

Varoufakis announced the decision in a blog post early Monday, saying there was “a certain preference” among European creditors that he no longer be involved in negotiations.

Tsipras described the result as a “great victory”, and said Athens would return to the negotiating table on Monday with a strengthened hand.

The move followed victory for the “no” campaign backed by Varoufakis and Prime Minister Alexis Tsipras in Greece’s Sunday plebiscite with a larger-than-forecast 61 percent of the vote. The referendum asked Greeks whether they would accept the terms set by creditors in exchange for financial aid, including curbs on early retirement and sales-tax increases.

With euro-area governments signaling it’s up to Greece to offer proposals on the way forward, Varoufakis’s absence from any future aid talks may help lower the temperature in its efforts to avoid an exit from the euro zone and secure a new bailout from European partners. The motorbike-riding Greek-Australian economist sparred openly with counterparts including Wolfgang Schaeuble of Germany over his lecturing style and insistence on immediate debt relief for Greece.

Creditor ‘Loathing’

“I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners,’ for my… ‘absence’ from its meetings,” said Varoufakis, 54, referring to the body of euro-area finance chiefs that led aid talks. “I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum. And I shall wear the creditors’ loathing with pride.”

Time is running out for Greece to secure a new deal to save its economy from outright collapse. Tsipras imposed capital controls and ordered banks closed a week ago to stem withdrawals, and they may begin to run out of cash within hours without an emergency lifeline from the European Central Bank.

Euro-zone leaders are due to meet on Tuesday for an emergency summit on Greece a day after Merkel and French President Francois Hollande hold talks in Paris on a common position. The Frankfurt-based ECB is also due to evaluate its next moves on Monday; Tsipras’s banking decree expires at midnight, and will probably need to be extended without a quick decision from the lender.

Humanitarian Crisis

“Our immediate priority is to restore the Greek banking system,” Tsipras, 40, said in a speech after the referendum result. “I’m confident that the ECB fully realizes the humanitarian side of the crisis in our country.”

European leaders are showing no immediate willingness to compromise. They firstly want to wait to see what proposals Tsipras will offer to keep Greece in the euro, according to a European government official with knowledge of crisis strategy.

The question remains whether Greece’s creditors will be willing to negotiate with a government that has rejected their conditions for staying in the 19-member currency union, after Portugal and Ireland accepted similar measures and emerged from their own bailout programs. Greece’s departure from the euro is now the most likely scenario, according to predictions from a series of banks including JPMorgan Chase & Co.

Tsipras has “torn down the last bridges across which Europe and Greece could have moved toward a compromise,” German Vice Chancellor Sigmar Gabriel said in an interview with the Tagesspiegel newspaper.

Restoring Dignity

Tsipras and his Coalition of the Radical Left, or Syriza, swept to power in January after campaigning to end crippling budget cuts forced upon the country by creditors and promising to restore “dignity.” Optimism for a deal toward the end of last month was suddenly halted when he called the referendum on June 27, putting an end to talks.

European leaders largely characterized the plebiscite as a vote on membership in the euro itself, although Tsipras insists Greece can stay in regardless.

The country is buckling under the strain of the capital controls and is at risk of undoing four decades of integration with Europe. The economy has already shrunk about 25 percent over the past six years while the jobless rate is still the highest in the euro region.

“The ‘no’ vote sets the clock ticking on the collapse of Greece’s banking sector,” Nicholas Spiro, the managing director of London advisory firm Spiro Sovereign Strategy, said in e-mailed comments.

With no clear timeline for banks to reopen, companies are concerned about how they’ll pay staff and pension payments are being rationed. Queues at cash machines in central Athens were noticeably longer than over the weekend, as Greeks waited to withdraw the daily maximum of 60 euros each currently permitted by the government.

Nonetheless, the referendum result was a source of joy for many Greeks and Syntagma Square turned into a raucous street party on Sunday as “no” supporters gathered to celebrate. Some danced to music playing from speaker phones, while others took selfies with the crowds in the background. Source: Bloomberg