Dimitris Michalakis / Reuters

Greece rejects European bailout terms, finance minister resigns

Finance Minister Yanis Varoufakis, who denounced creditors, resigned hours after vote to smooth path to a new aid deal

Greek voters overwhelmingly rejected creditors' demands for more economic austerity in return for rescue loans in a critical referendum Sunday, backing Prime Minister Alexis Tsipras, who insisted the vote would give him a stronger hand to reach a better deal.

Thousands of government supporters gathered in central Athens in celebration, waving Greek flags and chanting "No, No, No."

On Monday morning, Greek Finance Minister Yanis Varoufakis resigned, saying he was told shortly after the Greek referendum result that some eurozone finance ministers and Greece's other creditors would prefer he not attend the ministers' meetings.

Varoufakis issued an announcement Monday saying Prime Minister Alexis Tsipras had judged that Varoufakis' resignation "might help achieve a deal" and that he was leaving the finance ministry for this reason.

Varoufakis had visibly annoyed many of the eurozone's finance ministers during Greece's debt negotiations. He said in a statement released by the Finance Ministry that it is crucial there is a "proper resolution" involving debt restructuring immediately.

"I shall wear the creditors' loathing with pride," he said, adding that he fully supports the prime minister and the government. No replacement has been named.

Deapite the resignation of Varoufakis, the vote was a decisive victory for Tsipras who gambled the future of his five-month-old left-wing government on the vote. The opposition accused him of jeopardizing the country's membership in the 19-nation club that uses the euro, and said that a "yes" vote was about keeping the common currency.

The final results of Greece's bailout referendum are in, with all 19,159 precincts reporting. The "No" side won with a higher than expected 61.31 percent, while "Yes" got 38.69 percent.

A total of 6.16 million Greeks voted in Sunday's referendum, or 62.5 percent of eligible voters. The poll needed a minimum 40 percent turnout to be valid.

"Today we celebrate the victory of democracy," Tsipras said in a televised address to the nation, describing Sunday as "a bright day in the history of Europe."

"We proved even in the most difficult circumstances that democracy won't be blackmailed," he said.

"We don't want austerity measures anymore. This has been happening for the last five years and it has driven so many into poverty. We simply can't take any more austerity," said Athens resident Yiannis Gkovesis, 26, holding a large Greek flag in the city's main square.

How European officials react to the referendum result will be critical for the country, and a eurozone summit was called for Tuesday evening to discuss the situation. Investors responded quickly with Asian stocks hitting a six-month trough and the euro stumbling on Monday after the Greek vote raised the risk of a full-blown crisis in the euro zone.

Varoufakis said Sunday night that creditors had planned from the start to shut down banks to humiliate Greeks, and to force them to make a gesture of contrition for showing that debt and loans are unsustainable.

In the vote, "the Greek people said 'no more' to five years of austerity," Varoufakis said. The "No" vote "is a big 'yes' to democratic Europe. It's a 'no' to the vision of Europe as an infinite cage for its people. It is a loud 'yes' to the vision of the eurozone as a common area of prosperity and social justice."

The opposition has accused Tsipras of jeopardizing the country's membership in the 19-nation club that uses the euro, and has said a "Yes" vote was about keeping the common currency.

Belgian Finance Minister Johan Van Overtveldt was one of the first eurozone ministers to react to the initial results.

"This likely 'No' complicates matters," he told Belgium's VRT network, but insisted the door remained open to resume talks with the Greek government within hours.

German Chancellor Angela Merkel and French President Francois Hollande spoke to each other Sunday night and agreed "that the vote of the Greek people must be respected," Merkel's office said.

“I take note of the outcome of the Greek referendum,” said Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem, adding that the “result is very regrettable for the future of Greece.” The Eurogroup also will meet Tuesday.

But governing left-wing Syriza party Eurodeputy Dimitris Papadimoulis said the “No” result means that "Greek people are proving they want to remain in Europe" as equal members, "and not as a debt colony." The referendum was Greece's first in 41 years.

Minister of State Nikos Papas, speaking on Alpha television, said it would be "wrong to link a 'No' result to an exit from the eurozone. If a 'No' prevails that will help us get a better agreement," Papas said.

High-stakes brinkmanship between Greece and lenders from the eurozone countries and the International Monetary Fund resulted in Greece missing a payment on its debts this week and shutting down its banks to avoid their collapse. He called the referendum last weekend, giving both sides just a week to campaign.

"Today, democracy is defeating fear ... I am very optimistic," Tsipras said earlier in the day after voting in in Athens.

European officials had openly urged Greeks to vote against the government's recommendation.

"I hope people say 'Yes,'" European Parliament President Martin Schulz told German public radio. "If after the referendum, the majority is a 'No,' they will have to introduce another currency because the euro will no longer be available for a means of payment."

The vote was held amid banking restrictions imposed last Monday to halt a bank run, with Greeks queuing up at ATMs across the country to withdraw a maximum 60 euros ($66) per day. Banks have been shut for a week, and it is uncertain when they will reopen. Large lines once again formed at ATMs on Sunday.

Daniel Tsangaridis, a 35-year-old Athens resident, said he didn't expect banks to reopen soon, despite a government pledge that they would do so Tuesday.

"It's not going to happen in the next 48 hours," he said. "If the situation improves and we can have a deal, then the banks will open."

The Syriza party came to power in January after a six-year recession. Since then, the standoff between Athens and its international lenders has grown more bitter, and early signs of some economic growth and recovering employment in Greece have disappeared.

The debt-wracked nation also suffered repeated ratings downgrades and lost access to billions of euros after its existing bailout deal expired last week.

"Today, we Greeks decide on the fate of our country," conservative opposition leader Antonis Samaras said earlier Sunday. "We vote 'Yes' to Greece. We vote 'Yes' to Europe."

But upon learning of the decisive "No" win hours later, Samaras announced his resignation of the opposition New Democracy party.

A sense of urgency had been palpable ahead of the vote, as Greeks struggled to decipher a convoluted referendum question after being bombarded with frenzied messages warning of the country's swiftly approaching financial collapse.

Even with the decisive bailout rejection, Athens is still no closer to a clear answer on what Greece will do about its overstretched finances. The country is no longer in a bailout program since its previous package expired last Tuesday, so it will have to go back to the negotiating table to see if a new arrangement can be agreed upon. Whether Syriza's win will translate into better leverage is an open question, and a timetable for more talks is still uncertain.

Greek banks are expected to run out of money within days unless the European Central Bank (ECB) provides an emergency lifeline. Finance Minister Varoufakis was due to meet top Greek bankers after the vote. State Minister Nikos Pappas, one of Tsipras's closest aides, said it was "absolutely necessary" to restore liquidity to the banking system now that the vote is over. However the ECB may be reluctant to increase emergency lending.

The European Commission, the executive body of the European Union, said its head, President Jean-Claude Juncker, was consulting with the members of the Eurozone to plan next steps and would have a conference call on Monday morning that includes the head of the ECB and Dijsselbloem. 

Al Jazeera and wire services

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