European leaders raised pressure on Greek Prime Minister Alexis Tsipras to re-engage, saying it’s up to his government to step back from the brink and stay in the euro.
With Greece under capital controls and banks closed, German Chancellor Angela Merkel and French President Francois Hollande offered no concessions beyond saying that they remained open to talks, even after the referendum on the European Union’s aid proposal planned for July 5. European Commission head Jean-Claude Juncker said the “whole planet” would view a “no” vote as Greece turning its back on Europe.
Leaders were emboldened by a measured investor response to a weekend of turmoil as Tsipras’s government took emergency steps to avert the collapse of Greece’s financial system. While his decision to hold a ballot increased the risk of Greece exiting the euro, evidence of contagion elsewhere was limited, reducing his leverage over creditors.
“Europe can cope with such crises much, much better today because it has taken precautions,” Merkel said in a speech in Berlin on Monday.
The euro erased its losses after earlier dropping to a near one-month low against the dollar, and traded 0.3 percent higher at $1.1204 as of 7:00 p.m. in Berlin. European equities sank, with the Stoxx Europe 600 Index down 2.7 percent, while bond yields jumped in Italy, Spain and Portugal.
Those countries have all suffered bond panics since 2010 on concern they could slide into a Greek-style crisis. Their leaders moved to assuage concerns about contagion.
Italian Finance Minister Pier Carlo Padoan took to Twitter to reassure followers about his country’s direct exposure.
Greece’s problems show “the difference between the serious policies and those policies which aren’t very serious,” Spanish Prime Minister Mariano Rajoy said at a news conference.
In Athens, people have taken to the streets. A crowd of 12,000 gathered in the centrally-located Syntagma Square late Monday to call for a ’’no’’ vote against the EU proposals, according to police estimates. Banners were displayed in front of the parliament building. One read: “Our lives do not belong to the creditors.”
Greece has also become another thing for old Cold War foes to disagree on. Russia weighed in, with Foreign Minister Sergei Lavrov said he understood Tsipras’s actions. The U.S. instead is urging the Greeks to do what they must to stay in the 19-member currency bloc.
“We’ve long made clear that we expect the Greeks to keep their commitments,” White House press secretary Josh Earnest said Monday.
European leaders sought to reach out to the Greek people while offering Tsipras’s government little leeway after he broke off negotiations over future bailout aid at the last-minute on Friday. Tsipras, who promised to return “dignity” to the people and reject budget cuts imposed by creditors, appealed for “calm” after weekend-long queues at ATMs and gas stations.
The prime minister’s efforts to shield the poorest Greeks from the effects of his decision are already starting to unravel. Twelve hours after issuing the capital controls decree, the government revoked a provision in the law exempting pension payments from the 60-euro ($67) daily limit on bank withdrawals.
The about-face came as industry officials warned that the move to waive limits for pensions would have soaked up much of the system’s remaining liquidity and highlights the hurdles Tsipras still has to overcome to reach the July 5 vote.
Jeroen Dijsselbloem, the Dutch finance minister who leads meetings of his euro-area counterparts, said he regrets that the Greeks walked away.
“But they’ve chosen their path and we cannot interfere,” he told reporters in The Hague.