Greek crisis: IMF says it is ready to lend to Greece

The International Monetary Fund said on Monday it was monitoring the situation in Greece and was ready to lend a hand if asked following a referendum that rejected the bailout conditions of international creditors.

“The IMF has taken note of yesterday’s referendum held in Greece,” IMF Managing Director Christine Lagarde said in a statement. “We are monitoring the situation closely and stand ready to assist Greece if requested to do so.”

Greece's banks are expected to stay closed at least until Friday, four banking sources said, as the country tries to reopen bailout negotiations with official creditors and save its financial system from collapse. Greece issued a decree last week imposing capital controls and ordered banks to close after the European Central Bank (ECB) froze a vital financial lifeline following the breakdown of bailout talks between Athens and its foreign creditors.

Greece's main opposition and ruling parties on Monday issued a joint declaration backing the government's efforts to clinch a new aid deal, a move by Prime Minister Alexis Tsipras to cement broad support after a resounding referendum win.

“The government is taking the responsibility to continue the talks, and each political leader will contribute respectively within the framework of his/her institutional and political role,” said the statement, issued by the presidency. The leaders said they were seeking a deal with European and IMF creditors that ensure adequate funding, credible reforms, a growth plan and the commitment to start discussions on the sustainability of Greece’s massive debt. Their immediate priority was to get banks open again, they said.

Berlin earlier said Greece’s debt was sustainable and said there is no basis at the moment for negotiations with Athens about a new bailout programme.

Mr Tsipras spoke by phone with German Chancellor Angela Merkel and agreed to present a Greek proposal for an aid deal at Tuesday's European Union summit, a Greek government official said.

The summit will discuss the result of Sunday’s referendum that saw Greeks resoundingly reject the austerity terms of a bailout.

The official, who spoke on condition of anoymity, gave no further details of the call, which comes a day after Greeks voted overwhelmingly to reject the terms of an international bailout deal

Earlier, Greece's outspoken finance minister Yanis Varoufakis resigned, removing a major obstacle to any last-minute deal to keep Athens in the euro zone after the referendum result.

Mr Varoufakis, who infuriated eurozone leaders and recently compared Greece’s creditors to terrorists, said Mr Tsipras, thought it would be better if he stood down, after pressure from European leaders. A new finance minister is due to be announced.

Ahead of Ms Merkel's crisis talks in Paris with French president Francois Hollande, her spokesman said she had taken note of the result of the Greek people. Until she heard from Athens, however, there was nothing to talk about.

"Greece is in the euro zone ... it depends on Greece acting for it to stay that way," said Steffen Seibert, Ms Merkel's spokesman. "The readiness to talk is there, the door for talks is open ... but the circumstances are not yet there to begin talks about a new programme."

He said there was “absolutely no reason” to change the German view that Greek debt is sustainable, and that this was the basis on which German officials would enter any future talks with Greece.

Though German officials were tight-lipped on Monday morning, saying the ball was in firmly in Greece’s court, they sent a clear signal on what they feel any new EU/IMF programme application should not contain: an application for debt write-downs.

Last Thursday the Greek government pounced on an IMF document that said Greece’s public finances will not be sustainable without substantial debt relief, possibly including write-offs by European taxpayer financed loans. In addition the IMF said Greece would need at least an addition euro 50 billion over the next three years to stay afloat.

The release of the report caused irritation in Berlin but, officially at least, the public line is that there is “no dissent” with the Washington-based fund, just a difference of interpretation.

The IMF view that Greek debt was not sustainable was based on “its tradition”, said a finance ministry spokesman in Berlin, and its call for a writedown was a matter of the IMF reaching for a “classic” fund tool.

But the IMF was participating in a European programme that had agreed to try to avoid writedowns on unsustainable debt through “economic programmes and reforms”, the spokesman added.

“In Europe we have common agreement to go an alternative route,” said Mr Martin Jäger, spokesman for the finance minister.

He declined to comment on whether, in Berlin’s view, the ESM bailout fund could be activated only by an existential threat to the eurozone as a whole - or by instability in one eurozone member state, such as Greece.

“It is too early to rule things out ... at the end there can only be a concrete application to be examined by institutions, we cannot pre-empt that,” said Mr Martin Jäger, finance ministry spokesman.

Following Mr Varoufakis’s resignation, Mr Seibert said he didn’t think the chancellor had expressed “any feelings” on matter either way.

“It is always about positions, not personalities and Varoufakis was never her partner,” he said.

In a statement announcing his resignation, Mr Varoufakis said: “I was made aware of a certain ‘preference’ by some Eurogroup participants, and assorted ‘partners’, for my... ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement.”

Greece’s chief negotiator in aid talks with international creditors, Euclid Tsakalotos, is the government’s top candidate to become finance minister.

Officials in Berlin declined to comment on reports that the European Central Bank was poised to increase its emergency liquidity for Greek banks, standing at €89 billion.

Meanwhile, Mr Tsipras is due to speak by phone with Russian President Vladimir Putin on Monday, a Greek government official said.

The official said Mr Putin had initiated the call, which he said would take place during a break in talks in Athens between Mr Tsipras and political party leaders.

After five years of economic crisis and mass unemployment, Greek electors voted 61.3 per cent ‘No’ to the bailout conditions rejected this month by their radical leftist government, casting Greece into the unknown.

“You made a very brave choice,” Mr Tsipras said in a televised address as jubilant supporters thronged Athens central Syntagma Square to celebrate the act of defiance of Europe’s political and financial establishment.

“The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution.”

The euro tumbled against the dollar on Asian markets after the setback for Europe’s monetary union and European shares and bonds were expected to take a hit when markets opened after the weekend.

In early bond trading, investors rushed into safe-haven German bonds while yields on Italian government debt rose sharply.

Asian stocks suffered the biggest daily fall in two years, partly because of fears over China’s economy.

Analysts with several major banks including Citi, Barclay’s and JP Morgan said a “Grexit” from the euro zone was now their base case, or most likely scenario.

Analyst Kathleen Brooks of GAIN Capital, a foreign exchange firm, branded Greeks "Oxi-morons" and said the likelihood of Athens leaving the euro zone was now 80 per cent, although it would take years of negotiation.

But on the streets of Athens, citizens were unrepentant at their defiant vote.

“I voted ‘No’ to austerity; I want this torture to end,” said 42-year-old Katerina Sarri, a mother of two working at a Kiosk in Athens.

“I’m aware that we will suffer for years but I’m still hopeful. I need to know that there is light at the end of tunnel, that the lives of my children will be better,” she said.

Additional: Reuters