Angela Merkel and François Hollande during a press conference after their meeting at the Elysee Palace tonight. Photograph: Getty Images.
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No relief in sight for Greece as Germany and the ECB toughen stances

Merkel warns that it is up to Tsipras to make new proposals as the country's banks are put under further strain. 

One of the main arguments made by Alexis Tsipras for a No vote in the Greek referendum was that it would strengthen his government's bargaining power. But a day after the country's decisive rejection of the previous eurozone offer, there is little sign that it has done so. At her joint press conference this evening with François Hollande following their meeting, Angela Merkel emphasised that the onus was on Greece to come forward with "very specific proposals" (offering no immediate concessions of her own) and even went as far as to describe the previous package as "generous". Sigmar Gabriel, Germany's vice chancellor and the leader of Merkel's coalition partners, the Social Democrats, has declared that "The ultimate insolvency of the country seems to be imminent". 

Hollande, as before, took a more accommodative stance. But while stating that "the door is open" (though not as open as he would like), he warned that "There’s not a lot of time left. There is urgency for Greece and there is urgency for Europe". Valdis Dombrovskis, the European Commissioner for the euro, similarly concluded that "The no result unfortunately widens the gulf between Greece and other eurozone countries … There is no easy way out of this crisis. Too much time and too many opportunities have been lost."

It is time that is indeed the biggest obstacle to a deal. Greek's banks are close to running out of cash (one of the four biggest is reported to be on the brink). But the European Central Bank, the institution keeping them afloat, has again capped the level of emergency liquidity at €89bn. Rather than offering greater relief, it has tightened the noose by forcing the banks to provide more assets to the Bank of Greece as security against the loans. Robert Peston reports that this has reduced the spare cash-raising capacity of the banks from €17-20bn to between €5-7bn. By acting in this way, the ECB has opened itself to the charge that it has exceeded its mandate by intervening in a political dispute. 

The danger is that unless Greece makes immediate progress with the troika in the next two days, the banks will no longer able to function even at their current limited level (with ATM withdrawals limited to €60 a day and overseas transactions banned). Such a financial collapse would force Greece to leave the euro in order to allow its banks to issue a new and heavily devalued currency. Few are confident that it will be able to make a scheduled payment of €3.5bn to the ECB in two weeks' times. 

Of the three main possible outcomes to the crisis - a long-term deal to keep Greece in the euro, another short-term financing arrangement ("kicking the can down the road" as it has become known) or Grexit - it is the third that appears ever more likely. 

George Eaton is political editor of the New Statesman.

Photo: Getty
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The Brexiteers have lost battles but they are still set to win the war

The prospect of the UK avoiding Brexit, or even a “hard” version, remains doubtful. 

Before the general election, the Brexiteers would boast that everything had gone their way. Parliament had voted to trigger Article 50 by a majority of 372. The Treasury-forecast recession hadn't occurred. And polls showed the public backing Brexit by a comfortable margin

But since the Conservatives' electoral humbling, the Leavers have been forced to retreat on multiple fronts. After promising in May that the dispute over the timetable for the Brexit talks would be "the fight of the summer", David Davis capitulated on the first day.

The UK will be forced to settle matters such as EU citizens' rights, the Irish border and the divorce bill before discussions begin on a future relationship. Having previously insisted that a new trade deal could agreed by 29 March 2019 (Britain's scheduled departure date), the Brexiteers have now conceded that this is, in Liam Fox's words, "optimistic" (translation: deluded). 

That means the transitional arrangement the Leavers once resisted is now regarded as inevitable. After the eradication of the Conservatives' majority, the insistence that "no deal is better than a bad deal" is no longer credible. No deal would mean the immediate return of a hard Northern Irish border (to the consternation of the Tories' partners the DUP) and, in a hung parliament, there are no longer the votes required to pursue a radical deregulatory, free market agenda (for the purpose of undercutting the EU). As importantly for the Conservatives, an apocalyptic exit could pave the way for a Jeremy Corbyn premiership (a figure they previously regarded as irretrievably doomed). 

Philip Hammond, emboldened by the humiliation of the Prime Minister who planned to sack him, has today outlined an alternative. After formally departing the EU in 2019, Britain will continue to abide by the rules of the single market and the customs union: the acceptance of free movement, European legal supremacy, continued budget contributions and a prohibition on independent trade deals. Faced with the obstacles described above, even hard Brexiteers such as Liam Fox and Michael Gove have recognised that the game is up.

But though they have lost battles, the Leavers are still set to win the war. There is no parliamentary majority for a second referendum (with the pro-Remain Liberal Democrats still enfeebled), Hammond has conceded that any transitional arrangement would end by June 2022 (the scheduled date of the next election) and most MPs are prepared to accept single market withdrawal. The prospect of Britain avoiding Brexit, or even a "hard" version, remains doubtful. 

George Eaton is political editor of the New Statesman.