anchor: shock resignation. yanis varoufakis announced he is stepping down. as greeks vote overwhelmingly to reject further austerity. the euro holds and german bonds surge. more market volatility as china shows a fresh round of measures to stem equities.

anchor: you are welcome to "the pulse." i am manus cranny. also ahead of this hour, we will speak to the former italian prime minister mario monti and get his reaction. that is at 9:45 a.m. stay tuned for that. he and for fox's, -- yanis varoufakis, has announced his stepping down. the news at degrees voted overwhelmingly to retract further astray ready in a referendum. prime minister alexis tsipras held at the result is a great victory. that would allow him to return to the negotiating table with a strengthened hand. with all of the angles covered. erik schatzker on the ground and paul gordon in frankfurt. mark barton is standing by. strata erik schatzker.

what a 24 hours. the votes. what is the significance? varoufakis pulled one out of the bag. will do appreciate -- improve their negotiating? erik: let me quote from yanis varoufakis on his blog. an excerpt, soon after the results i was made aware of a certain preference by eurogroup partners from my "absence," an idea that the prime minister judge to be helpful. yanis varoufakis was the world to believe his stepping down to gear prime minister alexis tsipras a helping hand in his negotiations it is well documented as you know that varoufakis is very unpopular

with this fellow ministers. i want to pause. varoufakis may have been victim of internal syriza. politics. mr. varoufakis had a large worldwide media profile. she held a press conference before the prime minister took to the airwaves. last night was the last will receive mr. varoufakis in a blue t-shirt and helmet ride through the office. was that because he was really trying to give tsipras mr. a health -- mr. tsipras a helping hand or his last act of defiance? manus: talk to me about the mood. a resounding no vote. in terms of creditors' position

we know hollande and merkel will go back. they are not running, are they? erik: they are not a judging from the statements they made last week. here is an open question we heard from varoufakis and the number two in syriza that the negotiators or creditors were willing to hit at the table and the greek government was willing. there was enormous amount the daylight between the two sides. yes europe understands it greeks do not want war austerity. how does it change in the situation? mr. sippers encapsulated in comments he made last night. here is an accept. prime minister tsipras: our immediate priority is the expedient opening of the banks.

i am certain the ecb understands that the economic crisis a humanitarian dimension in our country. erik: everybody wants to talk about the possibility of a deal to avoid a greg's it. as you have heard from so many people the far more immediate problem, the want to which tsipras alluded is the scheduled opening of the banks tomorrow. if the banks do not open and it looks as though there will be an indefinite banking holiday, whatsapp's to the support he enjoyed last night with a 61% vote against debtor what happens to the support he enjoyed last night with a 61% vote against the referendum? manus: that is the reality. let's turn to paul. the question is the hazard can they provide liquidity, should

they continue to provide? a tough position for them, isn't it? paul: very tough indeed. is there only solvent the cause liquidity at the moment. they may struggle to do that. the ecb holds the fate and its hands. if the banks do not open tomorrow, they probably need more money. the question for the governing council members is shared as they do that? if they do likely to give politicians a little bit more time to come up with some kind of deal. it is always pocked with the ecb will put a deadline on that as they have. -- possible that the ecb will put a deadline on that as they half. therefore, we have to pull the plug. it would cause of the collapse of the banking system and put greece on the path toward a

exit. but time is running gap. manus: paul, let's switch to hans. you will be monitoring. hollande and merkel will meet. you've also had one saying the vote must be respected. the vote itself will not fix it. hans: everybody is waiting from greece. the idea is you debt restructuring should not be taboo that will be music to the ears of mr. tsipras. the french is probably talking about restructuring getting closer to a deal. we have not heard any similar language of the german side. what we have heard from the austrian finance minister is no

other additional eight. we are waiting to hear from mr. shore blood -- mr. schaeuble or lagarde. we have heard mr. varoufakis will not necessarily made that much easier. there is a view that mr. tsipras is as much as black as varoufakis -- is as much to blame as varoufakis. manus: thank you. hans nichols, erik schatzker paul gordon, a quick look at how the markets are reacting. mark the options to protect yourself. mark: earlier, the big stocks rose to the highest in three years and has come down a little bit. the benchmark to see how it is faring. this the euro stoxx 50, the

benchmark all 50 blue chips within the eurozone. down by 1.7%. earlier it fell as much as 2.4% free a week ago when the stoxx 50 opened, it open down. today, down to the lowest level since february. the stoxx 600 is down by 1.2%. last week it fell by 3.1%. european stocks last week had their largest weekly drop of the year. the ridge of 40 billion euros were wiped off of the value -- 340 billion euros were wiped off the value of the stock market. $14 billion wiped off of global stock markets as measured by the msci. this the euro-dollar intraday. interesting chart. earlier around 10:30 p.m. last night, get in close free it fell

as much as 1.3%. since as then, it is still lower by 0.25%, since then it has improved. it fell last week for the second week in a row against the dollar. history israel. self because seven days ago, the euro opened lower against the dollar after tsipras call to the referendum. this how the bond market is faring. pretty much a flight to safety treasury yields dropped to the lowest since june 19. german bonds are down. a look at greece tenure. they continue to climb. a week ago today, the yield on the greek 10 year roses much as 200 points. though most ever.

things are not as bad. a week ago, these two were as high as 50 basis points. now six or seven or higher. clearly some effect from the success of the anova vote and the greek referendum a but nothing like events from a week ago. manus: let's see of the rest of the week unfolds. weston that in mind, onto twitter. our twitter question is does varoufakis quitting help the greek negotiations? there is a man in the building who can help me. it is unicredit's chief globe economist. everett, greg caffe -- eric great have you with us. well, varoufakis has resigned pretty he intimated but cause the creditors. does that improve the

possibility of negotiations more constructive? guest: i do not think so. as your colleagues said he may have resigned for internal reasons. he was a bit of a prima dona a smart guy and charismatic. but at the advice, the thing to take away is the job of politicians, and their positions because they are good of dealing with people they do not like. that is their whole life. you do compromises and do not make it personal. they say it again and again, this is -- in my relations has not deteriorated. never had a one. it is slightly positive. do not forget, tsipras is not an easy fellow either. manus: why not join the fray? no vote, how does that equate in

terms of raising the risk that greece will have to exit the euro? erik nielsen: i changed my mind. i put the possibility well above 50%. there's a couple of possibilities you could get a deal of source that keep them in and changes the government or something. i think the overwhelming probability is unfortunately creek is leaving. and desert greece is leaving -- and greece is leaving and into chaos. where it takes us, i do not know. that is the difficult question. manus: that level chaos is something nobody wants to focus on. the immediate issues. one is the banks. not enough money weapon told by the banking authority. half a billion euros in the

system. nothing left. can or should the ecb actually give something to the banking system? erik nielsen: i do not think they have a choice. they cannot do it. they cannot give ela. they are probably borderline doing it already. unless of the european taxpayers the government so there's no real prospect of july 20 defaulting on the bonds, if those bonds are about to default, no possible way -- manus: take me through that. the ecb cannot morally -- illegally, excuse reprieve cannot legally lend to the banks. back to the ecb. erik nielsen: the greek banks would become insolvent if the greek government default and the

day july 20. everybody says defaulting to the ecb, it is under bonds. greek banks have those bonds. if they are defaulted upon, no question you can ask the greek bank. and then it is clear, you can see this two weeks out. the ecb now, the ela will be completely out of the question legally unless they get a guarantee from their own government they will underwrite the banks or government. that is what the meeting tomorrow is about after the eurogroup. manus: given data, these markets are remarkably content and this what i said last monday. surprise by moderate reaction in spread in the euro and equities. that scenario, is that the rail contagion? not the real potential contagion? erik nielsen: there will be some

contagion. but i am firmly believe that it is quite modest. let's see what happens when america comes in later in the day. we sought quite a clear picture last week. the asians get worry and they sell europe. the americans step in. maybe not today. i would not be surprised over the next few days if that is the picture. it is impossible to make a clear link from the greek problem to italy, spain, or portugal. if they were stronger because the ecb would support of them. manus: you will be with me. we will be with erik nielsen chief global economist. what else is on our radar. it has been a volatile day of training. china special -- fresh round of

measures to stem losses. the shanghai composite index rose nearly 8% before closing up 2.4%. chinese authorities suspended initial public offerings and a central-bank said it would provide liquidity. u.k. chancellor george osborne said the greece crisis justifies the push for further austerity. as he prepares to meet prime minster david cameron and mark carney to assess any follow-ups. -- any falls out. and rolls-royce has cut is guidance of full-year profit. the engine maker said a lower oil price will play on the marine business. it is trading down around nine per to percent. -- 9.2%.

we'll be straight to the former a tie-in prime minister mario monti and getting his reaction. -- will be speaking to the former italian prime minister mario monti and getting his reaction. we will be speaking to elena pan aritis. and will look at one of london's hottest restaurants. stay with us.

>> china would be more from greater concern but cause of this dell in the world economy. that's because of this scale in the world economy. -- because of its scale in the world economy. much more of a concern. manus: that was martin sorrell saying china is a bigger concern than greece. policymakers unleashed more steps to stop the plunge and equities. how did the markets react? more with mark barton. mark: the shanghai composite down by as much as 7.8%, the biggest intraday mover since september 2008. the fresh round of measures announced by the government failed to stem not the selloff, we did not get as much as a push. an increase of 2.4%.

a majority of the stocks with a companies, rallies for the nation's biggest financial and oil companies. all of the gains on monday. supported by two of the biggest companies. petro china and a bank. that's what you need to know. down by 27%. that's where the index peaked on the 12th of june. the chinese stock market and that time has plummeted by $2 trillion. a bigger amount that many stock markets are valued at. want to show you the hong kong market. it intraday bear market today. down by 11% from its peak on 11 -- april 28. today it is sell the biggest drop in the reagan years. we are followed by 11%. there is speculation the chinese

investors were moving money out. a much more open market and the mainland stock market. back in april, at it is highest since 2007. how things have changed in china and things are changing in hong kong. manus: thank you for that. straight to the chief asian economics correspondent. they are common goal within new positions pretty much every day all of the week. reporter: good morning. what the latest moves are doing is raising questions about how committed to market reforms chinese policymakers are. they said that they are pledged to the open market and breaking down barriers and allow capital total flow and but the latest moves to intervene in the way they have has risk questions about whether chinese are committed to the past or not? the backdrop of a time when

china was to internationalize is currency. it seemed they are wanting in doing another. manus: let's leave it there. enda curran for us on the china store. back to erik nielsen. i love what you said is greece is important relevant but a sidebar. what we are asking about is china. erik nielsen: that is exactly right. from his side, when i see around to europe he is issues like china. we will talk about greece because it is interesting and the front pages a newspaper for. on the business side, it does not matter. very dedicated to get somebody who really sees concern. look at the automakers the anybody else, these guys are

taking 20% or 30% of profits from china. if china slows down as they are this where the focus is and not greece. it is a political crisis not economic crisis. manus: economic value everything good our pockets. where have you guys decided or where china will slow down to? are you expecting more stimulus? we have had 4 rate cuts. not much is working. what more do you expect is a will do? erik nielsen: i do not think they are growing at the rate they are saying. if you look a energy consumption and that dropped by half compared to 70% or 8% surely growth is slower. you are hitting to down to something 2% or 3% growth over the next five years. the only question is would that happen gradually or in a -- and

that is difficult to say. you have series imbalances in china. dead serious imbalance -- serious imbalances in china. the demographics are terrible. you cannot estimate that five years from now growth will be much higher than 3%. how do you get it there is the real issue. manus: i want to go back to one other issue before we finish off. a bail in in greece is something people are talking about. how big of a risk is that? erik nielsen: for the commercial debt? it is a serious issue now. if you get an exit, is a bad word. and exit into a collapse. it is an illusion they you will get paid. if -- and that scenario, not

more likely, staying in the eurozone, it will come. manus: stay with me. we will be back after this break. ♪

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now it's easier than ever to manage your account. get started at xfinity.com/myaccount manus: welcome back to "the pulse." i am manus cranny. the top headlines print yanis varoufakis has announced his stepping down as greece's finance minister. he said it was after he was made aware of the preference of some negotiations of his absence. he said he considered it his duty to help a lexis tsipras, the prime it -- a lexis tsipras and he considered it -- alexis

tsipras and you consider it his duty. a group referendum and 61% said no to more spending cuts. alexis tsipras described the vote as a victim or. a great victory and said he would return to the negotiating table. -- describe the vote as a victory. the ecb governing council will meet today. banks will be closed and were close last week. let's take a quick look at the markets. after all of this news. mark barton? mark: the movement is into the haven known as europe. these are the yields the french 10 year is down by 2 basis points and german basis -- and german 10 year down by five

basis point. what is probably more interesting is the spread between the greek and german 10 year yields. i have a chart going back to 2010. the spread is now 16 points which is the highest since 2012. nothing near the levels we were at the height of the crisis in 2012 when the spread was essentially 35%. that is how today is affecting the's word. the yield difference between the italian 10 year and german 10 year right now is at the highest since june. we are at 1.59%. going back to the initial chart a look at the impact of periphery year. italian yields are rising. spanish yields are up by eight

basis points per remember a week ago today, at one stage both of the yields up by 50 basis points. it seems as though last monday was more of a shock on periphery bond markets than today. you cannot run away from the yield on the greek 10 year. last week a was stage, a roses much as 423 basis points which was the most ever. a small impact on the periphery but not as much as a week ago. manus: thank you for setting the same. greece economy has come to a standstill. what does the crisis may for the bond market? we are joined with our guests and erik nielsen's with me. thank you for giving us your time this morning. before the no vote came, a risk

of approximately 50% of greece having to exit the euro and euro zone. hasn't the no vote increase those risks for you? guest: yes, it has. the expectation is the negotiations will continue the room for compromise. even more limited than before on what will count as an overwhelming victory of the no camp. the risk of a failure reaching agreement is probably larger than it has ever been. if there's no agreement, it is hard to see how longer-term the greek authorities will keep us on the system running and pay its bills. the only exit then might be to issue iou's which is really the but his new currency. so yes in a nutshell, the risk

of grexit has increased due to the referendum. manus: when these negotiations were restarting could debt restructuring, if it is on the table, in some form as the imf has alluded to themselves and they are part of his creditor group. could that change your complexion or perspective? moritz kraemer: it could change. i expect their restructuring to be an integral part. i would expect as a creditor nations in particular would expect if anything the debt restructuring or debt relief if you want to call it by that name would be the end of the process. if greece were to adhere to the conditionality and introduced the structure reform that has happened so contentious over the last quarter's, if that is introduced been at the end like

as reward, you can say that will be debt relief. the greek side wants it the other way around and say we need to talk about debt relief first and foremost and then the rest. this is a conundrum in how they will square this circle. is very poor visibility. on this subject alone on the sequencing of what needs to be done, the talks could bring down. manus: moritz your job is to estimate the probability of specific bonds, how do you think about the person situation? you used whether they could pay the bills. we know they cannot pay the bills to the imf. how do you think about the risk of the debt you are particularly interested in and the linkages between what they do with the imf and the bonds you care about reverse the pensioners? moritz kraemer: the rate and

really addresses specifically the risk of nonpayment of commercial obligations to private creditors. there's actually contrary to was many people believe a lot of commercial debt outstanding which greece could default. the first opportunity would be the summary bond due next week. already small amounts around 80 million euros equivalent. what you need to keep remind is this a political decision. always a political decision. we need to as if it slightly syriza will pay the holdout on this 80 million wall of the citizens are constraining their on savings which might be more binding and stretch it in the coming days? from the political economy point of view, we think is quite a significant risk that greece will default on commercial credit. and the ccc- rating which is

the lowest rung. manus: that as you say cousin to the next critical -- that as you say constitutes the next critical step. we see mark putting the context of the periphery market. executive board member after the ecb says our will to act should not to be days. what do you think or when do you think you would see that made up the ecb to take extra measures to brands contain risk and the bond market, we are not there yet, are we? moritz kraemer: if anything what we saw last monday after the announcement all the referendum is a rather measured reaction in the bond market and the currency markets. this reinforces our view we have then holding for quite some time -- the contagion risk is fairly

manageable. other things being equal, this is it weakening the bargaining of the greeks. they have seen it will be a domino effect and once greece tumbles out, more widespread contagion. for the ecb specifically, i think it will be difficult for them, very contentious to move away what did they consider to be a rules-based organization. i would be very surprised if the ecb were to be front running the political leaders which are meeting of course tomorrow evening and taken a decision now . the expectation is they stand still and do not expand but also not withdraw it and see other political negotiations happen. you never know. there might be light at the end foof the tunnel.

the ecb does not want to plug -- pull the plug when the light is available. manus: moritz kraemer great to have you. mark carney and david cameron angela merkel will meet today to talk about the fallout of the greek referendum. mark carney said they are prepare for every eventuality. mark carney: a lot of sympathy for the hardships the greek people have endured. they is not of their fault but the fault us pretty terrible governments in the past. we want to greece to prosper. we feel a lot of affection for but ultimately if you're in a single currency there are rules you have to abide by. manus: wow. all very well.

more, to that end, was a three are meeting. the contagion has been they are not the contagion for the u.k. as of this moment seems limited. svenja: at this moment in time, yes. there is a risk that it will have an impact and not going to effect the economy and quite a good line for wednesday resurgence. what he will push for his more austerity. this is his job of however why it is important to get it in order. the problem now is in terms of what they can do. not that much they can do. they can show they are ready and having meetings. besides that, wait and see. manus: a real wait and see. talking on this more austerity and at the end, osborne going we

do not tend to get kicked out. i mean, this goes back to schaeuble's view could a devalue or rebirth or regrow and come back later? erik nielsen: no, i do not think so. you hear a lot of similarities if it was argentina for example print an enormous difference between breaking our currency board which is regime versus gore got and creating your own currency. you nikesh arora's trust and a reason why i do not think they can c -- you can not give that trust and a reason why i do not think they can create. they have trust with those in the square overnight but you saw day one people stopped paying their taxes and took money out of their banks. manus: the real money is already left.

the u.k., we have banks. svenja, this budget on wednesday, yesterday was wasn't that they are additional austerity cuts and lots of flags? svenja o'donnell: george osborne said he realized the 12 billion pounds and the welfare bill. a lot will come from benefit people of working age free housing benefits will be cut. cutting back on the subsidies global authority housing. we expect a range of cuts across the board. benefits will be scaled back. he said from the start that this is problems. the promise -- the problem is he is getting himself into less room in the future.

presenting effectively by law and contacts. -- in a contacts. -- income tax. this level of austerity and should we have impact on the u.k. economy, that's limiting his room for maneuver. manus: how much of a risk is sterling to our economy as well? it has fell 5% percent. a heck of a strong currency. erik nielsen: it is strange. the biggest on record and one of the weakest fiscal positions. less tightening over the last few years of any of the major european countries which is one reason why the economy grows very well. and the sterling. manus: erik you can definitely come back. we will spend a lot of time

together on wednesday and special coverage of the u.k. budget this wednesday. a george osborne speech at 1:30 p.m. london time. at 4:00 p.m., a special program on the unique markets on the summer budget featuring top talent from across the bloomberg spectrum. politics, intelligence, and business teams all here. up next, greece woes noto for the austerity. we will speak to the former italian prime minister mario monti. stay with us. ♪

manus: is very welcome back to "the pulse.” german factory orders sale in may compared to a month earlier. orders gained 4.7% on the year. that was almost a full percentage point higher than the estimates. rolls-royce cut the guidance for full-year profit. they set a lower oil price will weigh on is over sure markets. they said of the revenue target is unchanged. the stock is down 9%. yanis varoufakis has announced his stepping down as greece's finance minister. he said the decision after he

was made aware a certain preference by some participants for his absence from the meeting. he went on to say he considered it his duty to help mr. tsipras as greece prime minister and he will where the creditor's clothing with pride. they resounding no from voters and referendum on austerity. how will european leaders respond? joining us is former prime minister of italy and former eu commissioner mario monti. thank you for joining us this morning. the vote for no mr. tsipras said emboldens its position in the voice of the people should be heard. does it really push europe to reengage and be more generous and other terms to greece? mario monti: well, europe will certainly reengage and it will

never have a disengaged if it were for your. it was mr. tsipras the prime minister who in a strange way at the beginning of a negotiation and not at the end but in the midst of negotiations felt the need to reinforce his hand by t his popular support. now europe will reengage, i am sure. what i am not sure of is that mr. tsipras will meet with more favorable attitudes and more favorable results in the renegotiations to come because greece started off with a great sympathy that unfortunately,

they gradually dissipated around europe. manus: that sympathy has dissipated. the imf released a report on friday factually referring to the necessity for debt relief debt restructuring, whatever word you like to use. should europe and the politicians of europe put debt restructuring clearly on the table? is that the reality and has to be part of the renegotiation? mario monti: sat in my view will come to the table sooner or later but not before the greek government has demonstrated greater willingness and ability to engage domestically and the needed structure of reforms.

i believe that it would be perfectly normal if the structural reforms were interpreted with a more spirit by mr. tsipras and his colleagues. like the match for the fight against tax evasion and corruption than the previous governments did. there is not been much evidence in these actions either. manus: as you say, in a pedal of time -- period time, debt restructuring will have to take place as a former prime minister of italy, and matteo renzi's shoes, how does it fit? greater domestically in italy in greece is treated differently and sugar the irish and portuguese yield? they took their medicine and

they took the very real pain of measures inflicted by the creditors. mario monti: this is one reason why i believe the whole eurogroup will not be particularly generous to greece and greece alone. you mention prime minister renzi and of the case of italy. let me remind our audience that italy isn't the only country in southern europe -- is the only country in southern europe that has come out of the financial crisis without asking for any financial assistance from europe or the imf. and is says in the spring of 2013 when actually i concluded my government, again, the only country in southern europe which

out of the excessive procedure because italy was back complying with the budgetary requirements. france does not yet to do so. therefore, italians, although we are working harder not to have the -- doing many sacrifices. manus: in your opinion, in your opinion, given the no vote and of the liquidity crisis we now have in greece will greece be forced out of europe? mario monti: i believe that every effort will be made on both sides to keep greece and

the euro. by the way, a huge majority of the greeks do want to stay in the euro. and as i said the conditions for them to do so after these imaginative and a bit reckless move by mr. tsipras will not be easier then they would of been two weeks ago. i believe in the end, that will be a continuation of membership in the euro. manus: if you had a seat this evening with hollande and merkel , what advice would you give and what you think will be discussed? what would you say from the italian front? mario monti: an interesting question. when i had my meetings with mrs. merkel and the french president it was sarkozy then, after that

time italy was more regularly barred from the treo of -- trio of decision-making. i would say to them that greece should not be given any special treatment. other than generic spending that is an everybody interests to keep them in the euro. greece if they do comply which is not been the case -- manus: time has run out. let's see how the rest of the day. no special treatment from mario monti the former italian prime minister. no special treatment for greece. erik nielsen: mr. monti said it will. the biggest fiscal tightening

when he came in a rescued italy. and he says no special treatment. greece has no luck from everybody else. manus: we are back in two minute s. ♪

manus: yanis varoufakis announces he is stepping down. they overwhelmingly reject further austerity. german bonds surge. more market volatility. china announces a of measures to stem and equity right.

a very good morning to our viewers in new york. welcome to you waking up in the united states. i am manus cranny. this is "the pulse." yanis varoufakis has announced he is stepping down from the position. that news came after greece voted to reject further austerity in an unprecedented referendum. alexis tsipras hailed the result is a victory. that will allow him to return to the negotiating table with a strengthened hand. if erik schatzker is on the ground in athens. mark barton is standing by on the breaking news desk. let's head straight to you in athens. yanis varoufakis has stepped down.

what are you hearing in terms of his replacement? will he wear a shirt and tie? erik schatzker: there has been no word from the prime minister's office who may replace yanis varoufakis after that surprise resignation today. there are three leading candidates. the odds on favorite appears to be uconn santa motorists. the step in an april after they lost patience with yanis varoufakis in latvia. he spent his secondary education and his post secondary education in the u.k. earning a phd from oxford. he speaks english. he was a professor of economics. he has had direct experience in the bailout talks something no

other minister in the government come claim. he is the deputy prime minister. he is an english speaker. he is an act commonest party member. he was a member of the commonest party until 1991. he is not as well-known. i would finally voice -- point to the economy minister. that involves tourism and development. he has a phd from newcastle university. he is previously a visiting scholar at harvard. those three. they are considered the front runners. there is no official word from the government. manus: the banks, they are closed and have been closed. where are we with this? i had a conversation this is going to be a tough one. it's going to take a bail in. eric jeter -- erik schatzker:

the government has a few other alternatives on the table before it is forced to bail in the banks by cutting depositors. it's unlikely we will see that tomorrow. the reality of the situation regarding the banks, the seriousness that would open is not lost on the prime minister. this is an excerpt from his remarks last night to the nation. >> our immediate priority is the reopening of the banks were financial stability. i'm certain the ecb understands the economic crisis and the humanitarian dimension of. erik schatzker: that raises the question what policy the ecb was established to make. we know they are a monetary institution.

is it a humanitarian institution? that is not in its charter. i sent it back to you in london. manus: thank you very much. you're right to bring to our attention that is the nuclear option at. let's turn our attention to the ecb. i underestimated the situation. how do i represent the ecb position? paul: to put them at the heart of the matter they will understand the sector fights is the greeks have made. he is certain of that. i'm not sure they are so certain. it's going to be a very tricky debate. if it were to extend the emergency liquidity at the current level or at a higher level, it could be accused of funding insolvent banks.

it's a very difficult decision to make. it may feel it cannot take over the principal process. there is a working group going on. it's entirely feasible that ecb will say were going to give you a bit more time. once time has run out and the money is withdrawn, it's all over. don't waste this chance. manus: let's see where they play it. let's switch over to the political side. hans nichols is standing by for us. how long will they meet this afternoon? we should bring to the viewer attention that the eurogroup meeting is set to start on july 7. this will be at 1:00 p.m. that is tomorrow. mario monti said that the eurogroup want be generous with greece.

hans nichols: what they are expecting is for greece to put forth an effort -- offer. something they can run the numbers on the, that will happen before that meeting happens. time is not on their side. greece wants to get this done. they can try to process that and then go to the leaders later in the day. we are read very little for many finance minister across europe maybe with the exception of the french finance minister to think there's going to be progress tomorrow. there is an idea that debt negotiation and debt restructuring should not be a taboo. that is largely been in line with the french position. the eu commission has talked about that. unless there has been a fundamental change in the merkel block that you don't have a conversation about threat restructuring until greece does

the reforms they committed to unless you have a fundamental change their it's difficult to see how you could have progress. we heard from the austrian finance minister. he said unconditional loans is a nonstarter. that is where we are at now. the news seems to be mildly positive. yanis varoufakis could get to a deal faster. nobody has shown how you can do it quickly. manus: gemini, thank you very much. hans nichols is in berlin and erik schatzker is in athens. let's take a look at how the markets are reacting. there were some a big losses on the equities. what you make of it? mark: it's not as bad as it was a weeks ago. this is the euro. in can see from the area i circled that is just before 11:00 last night.

it fell as much as 1.3%. it has been coming back. yes it's down for two consecutive weeks, but not as low as it was. a week ago after the referendum, the euro fell 1.9% overnight on sunday. it finished the monday session higher. it will be fascinating to see how the euro fares when the u.s. comes in to play. this is the industry group. these are all 19 of them. they are declining today. the index is down by 1%. take a look at the banks. banks hold a lot of the sovereign debt in spain and italy. all but one bank is a czech republic bank, every other bank is trading lower today. it is the italian lenders that are bearing the brunt of the decline.

both of those italian banks are down five or 6%. the final chart i wanted to show you was the bond market. it's telling us that money is moving into the core part of the bond market. the french, the german, the u.k. bond markets. yields in germany are down to .73%. the greek bond market is faring differently as is the spanish and the italian bond markets. last monday, the yield on the italian and spanish tenure rose -- 10 year rose basis points. a week ago, the yield had its biggest ever intraday rise, gaining 423 basis points. the yield is at its highest since three years ago. things don't seem stressed like they did a week ago. manus: thank you very much.

that brings us to our twitter question of the day. does yanis varoufakis quitting help greek negotiations? mark, are they in a better position question work mark: yanis varoufakis told the greek people to vote now and we will have a deal within an hour and the banks will reopen on tuesday. that is not happening. that is not happening in any conceivable universe. he has to be the fall guy. he has to stand by those promises and then exit stage left so the government can get on. i still don't think it's a game changer. not this late. maybe in april, it might have made a big difference. if he started insulting his colleagues consistently, he

resigned on twitter. he's done far too much communicating policy on twitter. i know i am old and behind the times on social media. that is no way to run a country that is in the state that greece is in. he should not be announcing changes to the government through twitter. >> calling his colleagues terrorists he can't make it any worse. that is the key point. i am with you. how does it change? what happens over the next 24 hours. how does it really change it? manus: you tell me. is the next .4 hours they can't legally anymore money to the greek banks. they are running out of money.

this is where the whole thing can blow up in a social dimension. mark: none of us knows anything until we hear urkel speak. draghi doesn't know what to do until merkel tells him. we don't know anything. if the european commission sticks to its guns, stay in the euro or leave the euro, it might even greece it's out of the euro and it doesn't matter what the ecb does next. simon: you can't have the eurogroup going back on what they talked about a week ago. you can't say yes it's ok, we will change the rules. they made it very clear. if they said we will renegotiate, you are rewarding greece for this behavior. you can't do that. manus: you would have the irish

and the portuguese and a lot of other nations saying now we know, you can break the rules and do whatever you want in the debt market and you get back stopped. simon: i agree. nothing is going to happen until angela merkel speaks. it's going to be hard for the ecb to roll back comments made last week. this is simple. if you vote no than the it's going to be difficult for us to change the rules. if that's the case, it's going to be hard for them to extend it from where it is. you've got to say on the current basis that it's going to stay where it is. we have a real problem tonight. mark: angela merkel's silence is deafening. you have the most amazing event yesterday.

not a peep. if i were the greek people i would be very nervous about what happens next. i don't think that yanis varoufakis has been very reliable. i think he lied to the people last week and they are about to suffer the consequences. i am very afraid of what merkel says next. i think it's catharsis. the euro will be stronger without greece. you cut arise the wound. you make some generous humanitarian deal. it's over. simon: that has been there right from the start. anybody who wants to get back and look, it's the german press in january with the story.

mark: the surprisingly well-informed german press. manus: we do like a well-informed press. i wonder on a daily basis myself. the fate of the euro is in the next conversation. let's get back to athens and erik schatzker. take away. erik schatzker: thank you. she is a senior economic adviser to the greek finance ministry. thank you very much. your boss resigned this morning. why? guest: we need to ask the prime minister for that. we haven't had a chance to chat with them. i expect that it had to happen. given the fact that we need to get into a deal at a lot of the people at the negotiating team has changed. erik schatzker: which team? guest: the great negotiating

team. erik schatzker: why would this be an obstacle to a deal? guest: i don't believe it would be an obstacle. the policy that needs to be presented requires new people. it's been five months. you need to change sometimes. erik schatzker: you think a bunch of new faces is going to make it easier for alexis tsipras to come to an agreement? guest: i am assuming given the question you are asking me. we are going to see. we will find out very shortly and about 25 minutes or an hour. erik schatzker: there's going to be an announcement? within the next hour you expect? we are told the leading contenders, would you agree? guest: again, this is like

reading cards. these three people are the strong cards the the strong cards of the government. again, you can find an economics minister that might come from outside the group. who knows? erik schatzker: do you think any of them would be qualified and well positioned to represent greece? guest: they were already involved anyway. erik schatzker: for a time he took over. guest: he was in since the very beginning. the difference is he took a more front role that he had after april. erik schatzker: you understand the situation the country faces. will the banks open tomorrow? guest: that is our goal here and

we need a deal that will banks to open fast and allow us to go back to normalcy and allow the country to run with strong tourism and have our tourists come back and stay here happy. erik schatzker: where the prospects of coming to a deal that quickly after nothing following a months of negotiations? guest: i would not say after nothing. erik schatzker: there was a standoff. guest: we have a request from a new government to take a tool of democracy and ask its own people whether they agreed to continue or not with a specific proposal. i understand a lot of the criticism coming behind it. i am asking others to understand this is a country that has gone through a similar wave of austerity measures, measures of

physical adjustment for five years. there been signals for a different mix of those program reforms. erik schatzker: i think would be hard to find 70 who isn't sympathetic. sympathy and liquidity for the banks are two entirely different things. the ecb has to make a decision about liquidity. they are not chartered to be a humanitarian organization. we are not talking about save the children. guest: if 70 has no money to give you, he won't give you any. that is the end of it. you can push them as much as you can. if there is nothing to give then there is no liquidity. we are trying to work together towards an equilibrium that will generate a situation of good and good. erik schatzker: when the

negotiators sit down with the europeans as early as tomorrow or even today, what is their leverage? what car do they have to play to force the europeans into a more compromising position question mark --? guest: there is no way to force anybody. the interest is to work together. the interest is to have a fresh start. that is why we are changing people. be calm and based on rules. be based on technical standards and suggest how can we work together? the euro depends on 18 different countries. we have to grow productivity here. erik schatzker: is it a given that the banks will reopen? guest: we will have to find out tomorrow. it is not up to me to give you that answer. we have some we loose ends. the system -- it's a system.

it depends on too many other variables. we will find out today and tomorrow how things work. we do work very hard and we hope that we will get somewhere very close. erik schatzker: it was so kind of you. that is the latest from the assistant to the finance minister. there are no easy answers. manus: thank you very much. very well done down there on the ground. chapman, we've got simon and mark. we just heard from the advisor to yanis varoufakis. more announcements will be coming in the next hour. this is a strange way to do it here. we don't know when the banks will open or if the ecb will continue. how far are we from ious from this government to get the ports to work.

simon: we reported on friday that they will struggle to make it be on today. assuming the ecb does nothing, we are very close. a report came out in one of the british broadsheets over the weekend quoting yanis varoufakis that they would consider california style ious. maybe they should have done it at the start of last week. i have not seen that report anywhere else. it would suggest that we are close. you mentioned the possibility of nationalization of the banks. mark: i hope there is someone working on that land. they are going to need a transition to a new currency. if merkel has decided it's game over they haven't shown a lot of competence so far. yanis varoufakis said himself

last week they are not professionals. that's kind of scary. you would hope there is a small gang of clever people who say if were not in the euro anymore, how do we pay for medicine, how do we pay for food, how we pay our police, how we pay the army? how do you keep the economy rolling slowly. if it comes to paralysis -- manus: the political acumen of this group of people is very different. i am being very generous with my choice of words. this group of people have behaved rather differently. if they don't have a disaster recovery plan who pays the pensions and the salaries?'s when we think that money can come from? mark: you could have a humanitarian package.

that would make sense. you're going to have to have a debt restructuring. i can't see the rest of the eurozone letting them slide into being a failed state. it's hard to see where deal that keeps them in the euro comes from. simon: that's what's going to happen. i think there is a good chance that's were the discussions start tomorrow. when we talk about the humanitarian side of things that's were the main discussions will fall. manus: it would be a phenomenal moment in my lifetime if europe let a developed nation go to the dogs. from humanitarian point of view. let's talk about the financial point of view. the euro declines. the swiss national bank doesn't want to do this. simon: we were talking about it off air.

there is going to be a struggle for the guys at the desk. you've got to know this the ecb has done an astonishingly good job of firewall in greece. they continue to do so. the euro has been -- and we get stresses in the market, people are buying it back. reality is the markets are waiting to find out what happens next. i think it's a slow down -- burn down. mark: why not? it doesn't mean a hill of beans for the greeks. manus: i think we can leave it on that. it doesn't mean a hill of beans to the greeks.

the politicians are making up as they go along in europe. thank you for being it with me. stay with us. we will have much more from greece. we have our team on the ground. ♪

manus: welcome back to "the pulse." we're live from bloomberg headquarters in london. these are the top headlines. yanis varoufakis has announced he is stepping down as the greek finance minister. on his website he said the decision came after he was made aware of certain preference by some eurogroup participants for his absence from meetings.

he considered it his duty to help alexis tsipras. he will where the predators loathing with ride. greece voted to reject further austerity measures. conditions of the deal. alexis tsipras described it as a great victory. he said he will return to the negotiating table with a strengthened hand. they will discuss a new lifeline to greek lenders. the banks have been closed for -- since last week. let's check in on the markets. jonathan ferro is here. jonathan: it's lower, but there

is no panic. it was much lower than this at one point. the moves pale in comparison to the plunge after the referendum was first announced. as i say, it doesn't point to panic. it doesn't point to drama. here are the equity market moves. the moves lower are not huge. the bond market is similar. it's not as aggressive as you might expect. bond yields go lower. that is not huge move. in italy and spain, they are higher. they are up by nine basis points this morning. if you listen to some economists out there, jpmorgan, barclays are putting that as their base

case scenario. some are putting the probability at 75%. among the economists out there, the best case and arial is an exit from the eurozone. that is not reflected in the market. it is weaker by 6/10 of 1%. the point is what happens with the policy response. the ecb expects this to step in. they push back. they call for the first rate hike since 2006. clearly, if things do get a little bit more difficult from here, it will just be the ecb stepping and, it will be a global response. the consensus call that we will get a deal and the backup of the central banks, that is still in play this morning. thank you. manus: it's amazing what the

next 24 hours will bring. the next 25 minutes, that's going to bring you to surveillance with tom keene. he joins me now from new york. a very good day to you. hope you had a good fourth of july weekend. i spoke to the prime minister of italy and he said no special treatment for the greeks and silence from angela merkel. tom: the silence is a key point. i thought the research notes that are up are very important. i would highlight barclays. it drove the conversation forward. i would watch to ideas. one is when to the ious, the script come in. the other is the delusion we are going to get to july 20. there has to be action before then and we will see that starting today with the important meetings at the ecb. we will drive the conversation

forward. the former governor of the bank of cyprus will join us. we're looking forward to talking to him about the ecb and draghi. we will also talk to the best essay writer on the crisis. carl weinberg will join us. he has been a way out front on coverage of greece. manus: ok tom and let's see with today it brings us. never boarded. ever. joining me is michael, the professor at london business school. thank you for coming in. you flew to greece specifically to vote. that is the activate passionate man for his country. why did you do that?

michael: i thought it was a important vote. you would see that the planes were full for this weekend. a number of people shared my view. the concern i have right now also is what may start unraveling in greece is a dangerous set of events. the challenge is the following: we started with deciding to go for this referendum that was weird in a number of dimensions. the preparation, the priming mostly the fact that the view that he tried to advocate to the greeks is that you should vote no because that will strengthen my hand. what most of us who are not susceptible to state propaganda

that is not the case. it had been framed from people in the eu as a legitimation of the hooks to push greece up. manus: this is my most phrase we are where we are. we got a no vote. whether it was miss represented by propaganda or not, they have voted no. alexis tsipras doesn't have a finance minister. is he strengthened or is this a short-lived victory? those images, there were flags. is the country diluted? michael: that is doing what it does best. the communication and reality are removed. that was the last big party for a long while. reality has to emerge for the greeks. think about what happened.

alexis tsipras thought he was ready to sign a deal. he was extremely close to it. he flew back to get his party to support it. manus: or was he wasn't brave enough? michael: both things to go together. he could have drawn on the members of the opposition to support them. he wanted to keep the premiership. what is now happening is he is packed himself into a worse corner. he's not going to be able to pass it through parliament. that may have a referendum. now you have a referendum that suggests the solution would be. there have the legitimation of the exit. you will not set the precedent in terms of the markets. this is why you see the market response being muted. manus: they will be less

forgiving? less getting to the greeks? that sets a bad precedent. michael: i think this is what is going to happen. he strengthened his left wing. the left wing from his party is going to say they didn't say no to the previous package. he is caught between a bigger rock and hard place, given how he played it and strengthening. it's paradoxical in terms of what he wants to do. i think reality or panic is starting to set in. yanis varoufakis did not resign. he was pushed out. he was sacrificed to show the europeans they are willing to have a deal. i think the symbolic expulsion of him in the early hours of the morning was to pave the way for an agreement. the second thing that has happened as -- is the former

prime minister who was a very polarizing figure some will say he did step down. there could be a national unity government. we may have dramatic changes in greece when we are close to the grexit. manus: michael, thank you for coming in to talk to us. i wanted to give you a couple of headlines from siebert did that is the spokes person for mrs. merkel. this is her spokesperson. these are the comments. the government of german -- german government respects the voting greece. the door remains open for greece. the conditions are not in place for new talks. conditions are not in place for new greek talks.

these are breaking headlines from mr. siebert, the spokesperson for madame merkel. the future depends on it greek proposals. the proposal they put to the people was off the table. they must decide if they want to keep the euro. let's keep that in mind and see how the day shapes up. let's switch attention. let's refocus as it were. back home to base. david cameron and the bank of england governor, they will meet today to assess the fallout from the greek referendum rid yesterday, they said britain was sympathetic to the rate people but prepared for any eventuality. ask there is a lot of sympathy in britain for the hardship the people have endured. it's not their fault. of course, we want greece to

prosper and succeed. we feel a lot of affection for them. ultimately, there are rules you have to abide by. that's one of the reasons why we didn't join the single currency. manus: in terms of the impact on the u.k. it's contained. it's the indirect that you are focused on. svenja: the eurozone is the largest export partner. it will impact on that. it will indirectly affect the u.k. economy. osborne has been warning about that. he has been warning about greece being one of the big risks on the horizon for the u.k. economy for some time. manus: he actually -- during

that interview he justifies his reason to rip into austerity all the more in the u.k.. svenja: he is going to deliver a program a very tough austerity. he has identified 12 billion pounds of savings from the welfare bill. that's going to hit some people very hard. greece was worrying. it has given him the perfect line. we could be in this situation and we have put our house in order. it's more important for us to carry on with our plan. obviously, up to now, the phyfiscal tightening has not been as much as he wanted to. manus: we were both together with eric nielsen.

the irony was not lost on him in terms of the budgetary position. the deficit, this man on your screen right now, he is going to go ahead with these cuts. let's get to the big wins. you are hunkering down for the budget. we've got a lot of white flags over the weekend. what was the one that was off-color to you? svenja: i think we got some detail of the welfare cuts to come. that's going to dominate everything else. a lot of what's going to be in the budget we already know. they made a lot of pledges in the manifesto ahead of the election that they promised to keep. the inheritance tax threshold is going to be raised. the big question always was where are these 12 billion pounds of cuts in welfare going

to come from? there is still a lot more to come. manus: there is a heck of a lot more to come. we are depending on you. work hard. we have special coverage of the u.k. budget right here on bloomberg on wednesday. we will have george osborne's speech live. we are going to have a special program that gives you the market perspective. have business will react. we will feature top talent across the bloomberg spectrum. all the business teams will be right here on bloomberg to wrap up the budget. coming up, we are back in athens to get a take on the referendum voting. they voted last night. no to the european proposals as they stand.

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manus: welcome back to "the pulse." let's get back to erik schatzker in athens. erik schatzker: thank you very much. this is the managing director of athenian marble. it is a greek exporting company

that sends marble two countries around the world. i think we have to begin with the obvious question. our banks could open tomorrow? guest: no one knows. we hear people saying different opinions. the reality will be shown to us when we wake up tomorrow morning. erik schatzker: you run a business. what will happen if the banks don't open? guest: it will be a catastrophe. we will not be able to receive payment from our clients. there is a possibility of our business collapsing. we won't be able to continue our orders. erik schatzker: how long can you last? guest: we are already out of time. let's put it that way. at the end of the day, if things continue like they are at the moment, i can't see how we would last a week or so. without money, without orders

everything is cut off. we have been cut off from any sort of financing. erik schatzker: have you shut your business down? guest: not yet. we are hoping that things will turn better in the next hour or minute. erik schatzker: let's assume an optimistic scenario. there is a temporary agreement between the government and the european creditors and the banks open tomorrow. what do you do then? guest: we try to minimize the catastrophe. we try to minimize the damage. we try to explain to our clients that we are here. we are ready to continue normally. erik schatzker: what about the long-term? do you feel confident doing business? guest: i don't think any businessman can feel comfortable under these circumstances. everything looks to me -- we

cannot benefit from this situation. we don't know what is going to be the future. even the near future for us you can't predict. erik schatzker: what about the tax factor? all of the proposals the government put on the table for the european creditors involved higher taxes for private business. what is that going to mean for you? guest: i believe this is wrong because the more taxes you inflict on people in businesses, the list income the government will have. already, there is no money in the government. no one has paid taxes. the collection system has collapsed already. i'm not sure that when the banks open, how many greeks will be able to pay the liabilities to

the state. erik schatzker: we have to raise the prospect of a devaluation. i've heard from some exporters that the devaluation would not help. guest: if we come back to the national currency in the first month or year, things will not be as good as many think. i think there will be a lot of difficult days to come. erik schatzker: in the long run it, wouldn't you be better if you are working with a currency? guest: if we have a new currency. we would be isolated. erik schatzker: if you have a good product your customers

will want to buy at? guest: syria has many good products but no one is able to buy from them. i don't want to dramatize things. i hope for the best. i'm not sure this will benefit us. it's good to be quiet. it's good to see what's going to happen. erik schatzker. thank you very much. he is the director of athenian marble. he doesn't like to compare the prospect to syria. you know how difficult the situation must be for exporters if he is tempted to draw that kind of comparison. manus: it's fascinating in that conversation where he said even if you get the nirvana scenario liquidity is there and the banks reopened, the system has broken down it. the entire infrastructure is under pressure.

great job through programming of this morning. well done, sir. yanis varoufakis has resigned his post following the historic no vote. he describes himself as having been thrust onto the public scene by europe's in a handling of an inevitable crisis. always one for a great line. i caught up with him in paris a few weeks ago. we like to put his best bits in order. >> i am allergic to extending and pretending. i am quite confident. i have had enough of extending and pretending. >> you worked on a deal with

that debt being part of it? >> i prefer to cut my arm off. i wish we had -- this is not the statement i want to make. i wish we had never entered this. deep down all member states of the eurozone would agree with that now. it was very badly constructed. we have the right to be heard. we have the right to change -- challenge the logic. this crisis that began in 2008 instead of helping us come closer together, it's creating forces that make the political process of unifying even harder.

that is something we should lose sleep over. as germans, greeks, portuguese, as french. we will compromise. we will compromise. we will come to a speedy agreement. we are not going to end up being compromised. i'm not going to do press conferences while i am trying to escape. manus: on this past two hours you are going to get surveillance up next. no special treatment for greece that was the message from mario monti. that relief must be an egg -- integral part.

silence so far from madame merkel herself. that is up to greece to turn the referendum outcome into policy. europe waits. greece must deliver. join me on twitter for the rest of the day. that's it from europe. the u.s. except the baton. ♪

tom: greece votes no and creditors are loathing with pride and the market reaction.

the chinese and floating markets have stabilized after a $3 trillion hit. in this hour, robert hormath on the greek crisis. good morning, everyone, this is "bloomberg surveillance." it is monday, july 6. joining me is brendan greeley. bonnie: the euro is signaling it's up to greece to make the next move after voters rejected more austerity. whatever great -- greece decides to do next, it will be without the finance minister. he has quit. he says there is a preference among the european creditors that he no longer the involved in negotiations. he and the prime minister back to the no campaign that received 61% of the vote yesterday.