Greece to offer new bailout proposal to its lenders

Greece was no closer Monday to reaching a new bailout deal with its international creditors, but Greek Prime Minister Alexis Tsipras is set to offer new proposals at a European Union summit on Tuesday.

Tsipras spoke by phone with German Chancellor Angela Merkel, Europe’s chief advocate for imposing tough austerity measures on the Athens government, on Monday. Their conversation came in the aftermath of a resounding Greek vote Sunday against the lenders’ demand for new financial restrictions in Greece in exchange for more bailout money to keep Greek banks from running out of money.

European leaders said they are open to more negotiations with Greece, but said the 61 percent vote against more austerity in Greece did not change their stance against easing terms of a possible new bailout. Economic analysts say the long-running dispute could still force Greece from the 19-nation euro currency bloc, which would make it the first country to exit the eurozone in its 16-year history.

U.S. stock prices opened lower, as did markets around the world on Monday, although the early declines in the U.S. were not as large as some analysts predicted.

Debate around possible Grexit

The chief of the eurozone’s finance ministers, Dutch finance minister Jeroen Dijsselbloem, said keeping Greece in the eurozone “is still their objective and mine.” But he said the referendum “doesn’t bring us closer to a solution right away.”

“I have to say again that whatever the result of the referendum, tough measures are necessary in Greece, otherwise the country won’t recover, otherwise the government won’t work better, otherwise the economy won’t start turning,” he said. “And if the government and population reject difficult measures, then we get to a very difficult place, especially for the Greek people.”

A leading German economist predicted a likely Grexit, or Greek exit, from the eurozone. “I have very little hope that Grexit can be avoided,” said Henrik Enderlein.  He said there is an 80 percent probability the Grexit will happen.   “This situation is extremely dangerous for the euro area.”

Other European reactions

Meanwhile, the French finance minister held out the possibility of further talks with Greece. Michel Sapin said discussions with Greece are not “taboo,” but added Greece has no hope of recovering from its financial chaos “in the months and years to come” with its current repayment obligations.

“Europe is facing a difficult moment, but it is not in difficulty itself,” Sapin said. “Europe will show it is strong by protecting itself.”

French European Affairs Minister Harlem Desir said the Greek “no” vote Sunday in the snap referendum did not mean Greece wants to leave the euro, but talks with Greece must start soon “on a serious basis.”