Greece heads for 'no' vote, raising risk of exit from Euro

JUL 6, 20153:51 AM

[ATHENS] Greeks voted against accepting further austerity in exchange for a new bailout, emphatically raising the stakes in the country's confrontation with creditors.

With more than half of votes counted, 61 per cent of Greeks backed Prime Minister Alexis Tsipras by voting "no" to the latest proposals for spending cuts and tax hikes. Some 39 per cent voted to appease creditors, according to results from the Interior Ministry in Athens.

As Mr Tsipras's supporters party outside the Greek Parliament, the country now enters unknown economic and financial territory, with no clear path to continued European aid and banks closed. Greece's immediate fate lies with the European Central Bank, which may take its cues from European Union leaders as to whether it can keep emergency loans flowing to a country without the prospect of a bailout package.

"If confirmed, the 'no' would not put Greece on autopilot towards Grexit," Holger Schmieding, an economist in London at financial group Berenberg, said by e-mail. "But it makes it much more difficult to still avoid that fate." The result will likely roil financial markets and reverberate across Europe's political establishment after a confrontation that has torn up the rulebook on how Greece engages with the euro region.

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Euro Declines

JPMorgan Chase & Co. economist Malcolm Barr told clients a Greek departure from the euro is now the most likely scenario. In early trading in Asia, the euro declined 1.2 per cent to US$1.0986 as of 5:06 a.m. Sydney time.

The question for German Chancellor Angela Merkel and fellow leaders is whether they can negotiate with a government that has rejected their latest conditions for staying in the 19-member currency union, after forcing countries such as Portugal, Spain and Ireland to suffer through similar measures.

Ms Merkel and French President Francois Hollande will meet in Paris to discuss the Greek situation on Monday.

Mr Tsipras, 40, swept to power in January after campaigning to end crippling budget cuts forced upon the country by creditors and promising to restore "dignity." Five months of protracted and often antagonistic negotiations followed and optimism for a deal toward the end of June was suddenly dampened when he called the referendum a week ago.

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

Street Dancing

Supporters of the "no" camp gathered in Athens's main Syntagma Square to celebrate as results started trickling out showing a solid victory. Some were dancing to loud music playing from speaker phones or were having their picture taken with the crowds in the background.

Waving a Greek flag, John Govesis, 26, said he and his whole family voted "no." "I like freedom, I don't need money from Europe," he said. "This is the only way forward. I have a job, but maybe tomorrow I don't." The country meanwhile is buckling under the strain of capital controls and at risk of undoing four decades of integration with Europe. Banks, which have been closed for a week to stem withdrawals, are running low on cash and will struggle to re-open without significant new aid from the ECB.

Expired Package

The question on the ballot paper left some wiggle room for negotiations, since it applied to conditions on a bailout package that ceased to exist when talks broke off.

Mr Tsipras's government "will make every effort to close an agreement soon" with creditors, spokesman Gabriel Sakellaridis said in televised comments.

Finance Minister Yanis Varoufakis said in an interview last week he expected a deal to be done however the referendum went, though he would step down should it be a "yes" vote.

Greece has flirted with losing its place in the euro before, in 2011, when then-premier George Papandreou threatened to call a referendum. That too was framed by European leaders as an in-out decision on the euro, but was scrapped before it could be held and led to Mr Papandreou's departure.

Since Syriza came to power, the government has been trying to unlock about 7 billion euros from an existing bailout to meet payments to its creditors. That rescue package expired on June 30, the day the country missed a payment to the International Monetary Fund - becoming the first-ever developed country to do so.

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Aussie dollar falls to six-year low amid Greek turmoil

JUL 6, 20154:29 AM

[SYDNEY/SINGAPORE] The Aussie dollar dropped below 75 US cents to a six-year low as the heightened risk of a Greek exit from the euro added to slumping commodity prices in spurring traders to sell the South Pacific nation's assets.

Australia's currency was already sliding as iron ore, the country's biggest export earner, tumbled amid a glut in supply and concern that demand will shrink as China's economy slows. With 76 per cent of the votes counted in the Greek referendum on austerity measures required for financial aid, "no" was ahead with 62 per cent, data on the Interior Ministry website show.

Reserve Bank of Australia chief Glenn Stevens said in December he would prefer about 75 US cents for the Aussie. He spoke repeatedly this year of the need for a lower exchange rate and cut the cash rate in February and May to help the economy cope with the collapse of a record mining investment boom.

"There were a number of factors that were already driving the Aussie lower, including weakness in the terms of trade and the strengthening of the U.S. dollar," said Robert Rennie, the global head of currency and commodity strategy at Westpac Banking Corp in Sydney.

"The Aussie is heading down toward 72 to 73 US cents, the only question is how quickly it gets there, and the impact of the Greek referendum on risk assets has given it an extra push."

The Australian currency dropped as much as 0.9 per cent to 74.53 US cents and traded at 74.56 US cents as of 5:52 am in Sydney. It has weakened 8.8 per cent this year.

Depreciation Needed

"The current level of the exchange rate, particularly on a trade-weighted basis, continued to offer less assistance than would normally be expected in achieving balanced growth in the economy," the RBA Board said in minutes of its most recent meeting published on June 16.

"A further depreciation therefore seemed both likely and necessary." Similar comments have come from RBA policy makers on multiple occasions this year - in meeting minutes, rate- decision statements, speeches and reports.

In addition to jawboning the currency, the RBA has sought to reduce the attractiveness of the Australian dollar by cutting its cash benchmark by 2.75 percentage points since late 2011 to a record low 2 per cent. That still leaves it above every other developed-nation peer except for New Zealand and the global hunt for yield remains a source of support for the Aussie.

The 10-year Australian sovereign bond yielded 3.07 per cent at the close of trading on Friday in Sydney, 0.69 percentage point more than similar tenor U.S. debt. Australia also offered 1.78 percentage points more than the average of the other seven top-rated debt markets, helping attract investors such as central banks and sovereign wealth funds.

Central bank holdings of Australian dollars surged 12 per cent to a record A$149.4 billion (US$112 billion) in the first quarter, data published June 30 by the International Monetary Fund show.

BLOOMBER
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Greece 'No' in referendum sends euro into tailspin

JUL 6, 20154:00 AM

[ATHENS] Greece's government on Sunday looked to have won a 'No' it had been seeking in a referendum on bailout terms, but the euro immediately plummeted on fears the result could splinter the eurozone.

An official tally of over half the ballots cast showed a resounding 61 per cent of Greek voters had backed the government's 'No' in the plebiscite.

Senior eurozone officials were to hold talks on Monday to discuss the result, a European source told AFP.

France's President Francois Hollande and German Chancellor Angela Merkel were to meet in Paris the same day to assess the result, the French presidency said. Hollande also spoke with Greek Prime Minister Alexis Tsipras by telephone late Sunday.

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Ms Merkel's deputy chancellor, German Economy Minister Sigmar Gabriel, said Greek Prime Minister Alexis Tsipras had "torn down bridges" between his country and Europe with the vote.

New negotiations on a bailout were now "difficult to imagine," he told the Tagesspiegel newspaper.

The euro crashed 1.6 per cent in the wake of the referendum, to US$1.0963, in electronic trading before Asian markets opened.

Several EU leaders had said a 'No' vote could see an end to further bailout negotiations, forcing Greece to leave the 19-nation eurozone - and possibly even the European Union - in a "Grexit".

But Athens insisted the result meant it was better placed now to demand its international creditors - the European Commission, European Central Bank (ECB) and the International Monetary Fund (IMF) - drop harsh austerity demands and accept a restructuring of its debt.

"With this result, the prime minister has a clear mandate from the Greek people," government spokesman Gabriel Sakellaridis said on television.

"Initiatives will intensify from this evening (Sunday) onward so that there can be a deal" on a new bailout, he said.

He added that the Bank of Greece was immediately asking the European Central Bank to inject emergency euro cash for Greece's depleted banks, which have been shuttered all week because of capital controls.

Defence Minister Panos Kammenos, who also leads the junior coalition party in Prime Minister Alexis Tsipras's leftwing government, said in a tweet that the Greeks "proved they don't bow to blackmail, to threats".

Cheering crowd

A growing crowd of 6,000 gathered in central Athens late Sunday to celebrate the 'No' vote. The scene was festive, with cheering and smiling Greeks shouting "Oxi" (No) and hugging each other.

"I believe in Tsipras and in this government," said George Stasinopoulos, 25. "The governments in Europe don't support us but their people do and this gives us courage." He said he believed the result would secure "a better future for me and my children".

Mr Tsipras, who had staked his political career on the outcome, had said as he cast his own ballot in Athens that "no one can ignore the will of the people to live, to live with determination, to take its destiny into its own hands".

However, in other streets in the capital, some voters who had cast 'No' ballots said they had been confronted with an impossible choice.

One of them, Nika Spenzes, 33 and unemployed, said: "I'm not happy - we cannot be happy as a nation with this unemployment and poverty. And a 'No' victory doesn't mean there's any more hope for Greece than before." Even 'Yes' voters were ambivalent about their camp's apparent defeat.

Paris, a 41-year-old dentist who had voted 'Yes', said: "I cannot honestly say I'm sad if the Nos have won because there's no real hope either way."

Banks need cash

Greece's most pressing problem, was to ease capital controls Mr Tsipras's government ordered to stem a bank run that had been rapidly draining bank deposits.

The measure, implemented after his announcement a week ago that he had suspended bailout talks to hold the referendum, has limited ATM card holders to daily withdrawals of just 60 euros (US$67) a day.

Panic at that step, and at fears of Grexit, also prompted citizens to stock up on non-perishable food, medicine and imported goods, clearing out supermarket shelves.

The Greek banks' liquidity was expected to dry up entirely within a day or two unless the ECB - a major creditor - injected funds quickly through the Emergency Liquidity Assistance (ELA) mechanism.

The Euro Working Group, which comprises top treasury officials who prepare meetings for the Eurogroup of finance ministers from the 19-country currency union, will hold a meeting Monday to discuss the referendum.

Martin Schulz, the head of the European Parliament, though scathing of Tsipras's actions, told Germany's Welt am Sonntag newspaper that Europe could give short-term emergency loans to Greece "so that public service can be maintained and needy people get the money they need to survive".

Greece was officially declared in default on Friday by the European Financial Stability Facility, which holds 144.6 billion euros (US$160 billion) of Greek loans, after Athens missed an IMF repayment.

Mr Tsipras has called for the ECB, IMF and European Commission forgive 30 percent of the 240 billion euros (US$267 billion) they have loaned Greece over the past five years, and allow it a 20-year grace period before it starts repaying the rest.

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Europe 'will lose €1 trillion if Greece goes under'

Greek Finance Minister accuses creditors of 'terrorising' his people into accepting austerity

A woman holds the flag of Greece at the Greek solidarity festival in Trafalgar Square, London, Britain, on July 4, 2015. PHOTO: REUTERS

PUBLISHED

5 HOURS AGO

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ATHENS • Europe will lose €1 trillion (S$1.5 trillion) if it allows Greece to go under, the country's finance minister said yesterday, accusing creditors of "terrorising" Greeks into accepting austerity in a referendum on bailout terms.

After a week in which Greece defaulted, closed its banks and began rationing cash, Greeks vote today on whether to accept or reject tough conditions sought by international creditors to extend a lending lifeline keeping the country afloat. Their decision could determine Greece's future as a member of the single currency.

Addressing a crowd of over 50,000 in central Athens, left- wing Prime Minister Alexis Tsipras urged them to spurn the deal, rejecting warnings from Greece's European partners that this may bring an exit from the euro zone and even greater hardship.

A slew of opinion polls gave the "yes" camp, which favours accepting the bailout terms, a slender lead but all were within the margin of error and pollsters said the vote was too close to call.

Finance Minister Yanis Varoufakis said there was too much at stake for Europe to cast Greece adrift. "As much for Greece as for Europe, I'm sure," Mr Varoufakis told the Spanish newspaper El Mundo. "If Greece crashes, €1 trillion (the equivalent of Spain's gross domestic product) will be lost. It's too much money and I don't believe Europe could allow it."

He added: "What they're doing with Greece has a name: terrorism. Why have they forced us to close the banks? To frighten people. And when it's about spreading terror, that is known as terrorism."

Athens' 18 partners in the euro zone say they can easily absorb the fallout from losing Greece, which accounts for barely 2 per cent of the bloc's economic output. But it would represent a massive blow to the prestige of Europe's grand project to bind its nations into a union they said was unbreakable.

Capital controls imposed by the government last week have driven home for many Greeks the catastrophe they face if the nation exits the euro zone and is forced to turn to a new, heavily devalued currency.

Ms Louka Katseli, chairman of the National Bank of Greece, said that without a fresh injection from the European Central Bank or lowering the ceiling on withdrawals from €60 now, ATMs will start running dry within hours of today's vote.

Finance Minister Wolfgang Schaeuble of Germany, which is Greece's biggest creditor and toughest critic, appeared to suggest that Greece may be left without the euro currency "temporarily".

"Greece is a member of the euro zone. There's no doubt about that. Whether with the euro or temporarily without it, only the Greeks can answer this question. And it is clear that we will not leave the people in the lurch," he told the Bild newspaper.

REUTERS, BLOOMBERG

Europe tensely awaits Greek voters' decision

JUL 5, 201510:49 AM

[BERLIN] German Chancellor Angela Merkel and other EU leaders await with trepidation the outcome of a referendum in Greece Sunday that is already dividing opinion in Europe and could even shape its future.

After months of fruitless talks with its creditors, Greece's dramatic bid to place a bailout decision in the hands of its people will have an impact far beyond the heavily-indebted country's borders, analysts warn.

The vote on whether to support Greece's radical left-led government in its tough anti-austerity line is a "signpost" for future negotiations, said Julian Rappold of the German Council on Foreign Relations.

With fears a "No" vote could lead to Greece exiting the eurozone - a so-called "Grexit" - Pawel Tokarski of the German Institute for International and Security Affairs said its impact would reach much further.

It will "determine the future trajectory of European integration," he said.

Ms Merkel, seemingly sanguine last week in remarking that Europe could "calmly" await the result of the referendum because the bloc was "strong", has been at the forefront of efforts to resolve the crisis.

Now, the head of Europe's biggest economy is "faced with a dilemma", Rappold said.

If Greece were to leave the euro, it would signify the failure of Europe's crisis management that Merkel has championed though years of economic turbulence.

"She would not like it to be said that she pushed Greece out of the euro," Rappold added.

She also fears unforeseen economic consequences, a boost for anti-euro groups in some countries and that a "No" vote would be seen as a sign of weakness by nations such as Russia or China, he added.

But if Greek voters defy Tspiras and vote "Yes", Merkel must win parliamentary approval for negotiations on a new aid programme for Greece amid growing dissent within her conservative party on the Greece issue.

She would also have to win over a bailout-weary public tired of picking up a lion's share of the bill.

But the referendum is not just dividing Greeks.

Germany's Bild mass-market daily, which has taken a tough line with Athens since the start of the crisis, held its own referendum, asking readers if they wanted to go on supporting Greece with billions of euros.

It said the response indicated that 89 percent of the 200,000 people who took part said "Nein".

Thousands of Greece supporters meanwhile took to the streets of Barcelona, Paris, Dublin and Frankfurt to show solidarity with the Greek people and hit back at European policies.

Merkel was greeted by placards stating "Oxi" (no, in Greek) at an event in Berlin Saturday for her Christian Democratic Union party's open day.

In Spain, which has endured its own economic crisis, allies of Greece's Syriza party see the referendum as an historic opportunity to change Europe, months before the country holds its own polls.

Parties on the political right however fear a spread of radical leftist policies.

If Italians were called to vote like the Greeks, 51 percent would support tough measures imposed by Europe to avoid crashing out of the euro, while 30 percent would vote against, according to a recent poll by Ipsos.

And Britain, too, where voters will be called to decide on its future in Europe, sees a particular resonance in the Greek bid.

Elsewhere among Europe's leadership, European Central Bank chief Mario Draghi will also dread a "No" vote.

He is not accountable to voters but nevertheless is in "an extremely difficult situation", Tokarski said.

Through its emergency funding, the ECB is keeping Greek banks afloat. If it were to stop these loans, it would risk pressing the "Grexit" button - a decision its chief wants to leave to the politicians.

For now though, the post-referendum scenario is far from clear, especially as the question being posed is open to wide interpretation.

Athens argues it means saying "No" to new austerity measures proposed by creditors in return for aid.

But this proposal has in the meantime expired, leaving others to interpret the referendum as a vote for or against the euro.

"Whatever the result, it will be interpreted differently by political forces in Greece and in the eurozone," Tokarski warned.

AFP

    
 

Japan pledges US$6b to Mekong nations as China prepares new bank

Japan said on Saturday it would extend around US$6 billion in development aid to Mekong region countries, as China prepares to launch a new institutional lender seen as encroaching on the regional clout of Tokyo and ally Washington. 

PHOTO: EPA

JUL 4, 201511:29 AM

[TOKYO] Japan said on Saturday it would extend around US$6 billion in development aid to Mekong region countries, as China prepares to launch a new institutional lender seen as encroaching on the regional clout of Tokyo and ally Washington.

Cambodia, Laos, Myanmar, Thailand and Vietnam all have strong economic growth potential, and are promising destinations for Japanese exporters of railway systems, power plants and other infrastructure.

Tokyo's planned assistance of about 750 billion yen over the next three years follows a pledged aid of 600 billion yen to the five nations in the preceding three-year period. The fresh aid was announced at the conclusion of a summit meeting in Tokyo between Japanese Prime Minister Shinzo Abe and the Mekong region leaders.

China, while rapidly modernising its military, has built artificial islands in areas of the South China Sea over which several other countries have rival claims, stoking regional tension. "Both sides noted concerns expressed over the recent development in the South China Sea, which will further complicate the situation and erode trust and confidence and may undermine regional peace, security and stability," a summary of the Japan-Mekong cooperation agreement read, in a veiled criticism of China's recent maritime expansion.

Japan in May unveiled a plan to provide US$110 billion in aid to drive Asia's high-quality and environmentally friendly infrastructure projects.

That contrasts with the China-led Asian Infrastructure Investment Bank (AIIB), whose projects Washington has said may not properly safeguard the environment.

Sino-Japanese relations have been plagued by territorial disputes and the legacy of Japan's wartime aggression, although ties have seen a thaw since Abe and Chinese President Xi Jinping held their first summit last year.

REUTERS