(Bloomberg) — Greece’s creditors turned up the heat on Prime Minister Alexis Tsipras to come up with a plan to stay in the euro, as banknotes become more scarce and the nation stares at an economic calamity.
After voters emphatically endorsed Tsipras’s call for a “no” to more austerity in Sunday’s referendum, European finance ministers are waiting for a proposal to re-start bailout talks. In a bid to speed the process, Greek Finance Minister Yanis Varoufakis said he was stepping down after more than five months of confrontation.
The onus is on Greece to act quickly to avoid a meltdown of its banking industry. A week of capital controls is set to be extended, while the cash machines that have money are running short of notes and pensions are rationed. German Chancellor Angela Merkel and French President Francois Hollande are due to meet other euro-region leaders tomorrow as the crisis escalates while the European Central Bank is also evaluating its next moves to keep the country afloat.
“Time is running out and the window for a deal keeps narrowing,” Mujtaba Rahman, head of the Europe practice at Eurasia Group in London, wrote in a note to clients. “The euro leaders’ summit on Tuesday is likely to prove decisive for Greece’s euro membership.”
Financial markets were more sanguine about Greece’s fate. The euro was down 0.8 percent to $1.1029 at 2:25 p.m. in London. The Stoxx Europe 600 Index fell 1.3 percent, compared with a drop of as much as 3.2 percent a week ago when Tsipras introduced capital controls and closed banks.
The problem for Tsipras is that the muted response from investors was matched by European leaders showing no immediate willingness to compromise. Merkel’s chief spokesman, Steffen Seibert, said no resolution was imminent. A deal within 48 hours will be “difficult to achieve,” he said.
“In the next couple of days we’ll see whether there is sufficient trust and the political opportunity to find a solution,” Jeroen Dijsselbloem, president of the group of euro- region finance ministers, told reporters in The Hague. “That has to be looked at. It’s not so easy to close a door.”
Varoufakis said his departure was intended to bolster Greece’s position after a larger-than-forecast 61 percent of voters rejected further austerity. The motorbike-riding economics professor had sparred openly with counterparts including Wolfgang Schaeuble of Germany.