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. it was called a courageous

choice. >> today we celebrate the victory of democracy but for tomorrow come altogether, we continue and will complete our national effort on exiting the crisis. our strong ally is the great people's belief in its own strength and justification that we are in the right. vonnie: the leaders of germany and britain france -- and france will get together to discuss the crisis. greece may run out of cash within an hour unless the ecb extends another lifeline. there was a big drop in the shanghai composite. bennett rose because of oil. the chinese government has suspended ipo's and boosted cell purchases by state run financial firms. the index is down 27% since june, 2012.

secretary of state john kerry has expectations that a nuclear deal from iran is imminent. he said negotiators are not where they should be on most difficult issues. the talks have run on for nine straight days of u.s. says it will only agree to a deal that restricts the iranian ability to make nuclear weapons. a big acquisition and the health insurance industry is putting pressure on others to make their own deals. aetna agreed to pay 35 ilium dollars for humana. is the first deal among the largest companies in the business. a takeover of cigna could be next. in soccer, the u.s. has he come the first three-time winner of the women's world cup. the u.s. got a 40-0 lead and the first 15 minutes. the final was 5-2.

lloyd was named the tournament's best player. >>brendan: she looks at the position of the goalie and launches it from hatfield. . -- from half field. culture matters because french -- trench banks have the biggest investment in greece and now it's still friends -- still france. they have had the most kind words for greece. tom: let's get through a data check. futures have been improving and crude oil taking it on the chin.

i will call the euro relatively stable. the vix is closing 16.9. the two year yield on greece is all you need to know. this will be the focus as we speak to our guests this hour. greece-germany spread is out to new crisis levels harkening to two or three years ago. let's look at that euro-swiss. all you need to know is the spread circle is a one-year out that -- bet that sweden and switzerland will have the knockout if act. this is not about greece. it's about the knock on effects to the euro. brendan: there are long-term concerns about the euro. forgetting greece, the chart reads out to the tenure.

this is a long-term debt -- bet. tom: we need to begin in athens with erik schatzker looking at the protests last night. we will go to hans nichols in frankfurt in a minute. greece has to get to july 20 or maybe july 7 with a lack of cash and the potential issuance of iou's. we begin with hans nichols in berlin and eric schatzker in athens. are there iou's on the street at this time? erik: there are only pamphlets left out on the street. more than 61% in the referendum voted no. this morning, who is going to be

the next finance minister? the finance minister unexpectedly resigned. what we are trying to figure out is did he resign himself or did the prime minister push them out? there is a lot to be read between the lines. i would not take anything for granted. tom: very quickly, is the left in athens stronger this monday morning? erik: i would say unquestionably but that strength may last only briefly. this is the same prime minister and the same party that has promised the great people that tomorrow the banks will open. if the banks do not open tomorrow and depositors face the prospect of haircuts, the prospect that they may lose their life savings that support

will evaporate very quickly, maybe a matter of days. tom: thank you. brendan: we have hans nichols in berlin. there was a phone call from the greek premise or with france but angela merkel's spokesperson says her rescue policies have not hailed. that says she is worried about her legacy. is it the french or german concern that will keep us together? hans: is her legacy building a reaffirming strong euro zone or as a keeping greece in the eurozone by raking those rules? the discussion seems to be almost uniformly -- we have heard members of parliament all morning -- that the rule cannot be broking and you cannot have

any unconditional money going out the door to athens because you may not get it back. brendan: in order for the german parliament to approve any new deal, they've got to come back this summer. any sign that might happen? hans: until we have an official request from greece to the eurozone group they will meet this time tomorrow, that is several steps down the road. we had to do so might think before you can think about an emergency summit not the least of which is having a bill passed the house and parliament in athens. otherwise, you will not have a vote let alone a summons bringing the german parliamentarians back from vacation. tom: thank you so much. a today decision will not happen according to reports. we will go to an expert on the crisis who was out front on the real economic effect of the greek financial crisis. this is carl weinberg of high frequency economics early on calling for depression.

your notes this morning really drove over the desperation of athens. is the rest of europe aware of the desperation within the nation of greece? carl: good morning i think the leaders are aware of the urgency of the situation, the name of their game right now is to avoid default which is the same thing as bringing stabilization to greece. they have to be focused on a 4- point agenda. by tomorrow's summit, the have to cut with a plan to save the banks and if necessary direct the ecb to keep the ela open. the heads of state have to get the finance ministers back to the table, talking about what happens next. they have to get a negotiator in there to help them as a mediator and move forward. the most important thing on the agenda is restructure the bond due on july 20 that one bond the ecb has to begin in a green

light to accept other paper in exchange so we don't get default. tom: dr. weinberg did not mention the emf. are they part of the discussion? brendan: if the greek government issues and iou to pay pensioners, does that automatically mean new currency out of europe? carl: it's a long way to get out of the euro to issue script. they did it in california but they are still part of the united states. if that's it they have to do that would be something they have to do. it would probably be something that in retrospect would be deemed illegal but i don't think it necessarily means they are going to their own currency. the greeks and their best course is to stay within the euro. the europeans know the best way to get their money back is to keep greeks in. no one's throwing them out anytime soon. tom: tell me what the reaction will be among the italians and

the portuguese? if frankfurt is the focus today, mario draghi is the focus more than anyone and maybe angela merkel but carl weinberg, how does portugal for ireland or italy response to this crisis? carl: i am reminded of the latin american crisis back in 1980's when early countries came in and negotiated with the bank and further down the line, countries like argentina stood up and pushed back a little bit. the result was that countries after them got better deals. this puts this tactic on the table and does not drive anybody to renegotiate their debt it opens the door to the fact that the imf course of austerity may not always be the most immediate important thing to do. it may not be the best strategy for every country at every point in time. tom: thank you so much. we victim four hours of coverage this morning.

the former central bank governor will join us. he is critical in understanding the ecb response to that vote last night in greece. stay with us. "bloomberg surveillance." ♪

tom: good morning and we welcome all of you especially across the continent of europe. let's get to the top headlines. vonnie: more than one million people will attend a papal mass in ecuador. and enthusiastic crowd greeted pope francis yesterday. it's the first stop of his nine-day trip to south america. is scheduled to visit bolivia and paraguay but escaping argentina. more than 130,000 people have

signed a petition demanding the removal of the interim ceo. he has been accused of censoring online message boards at reddit. they experienced blackouts friday. he gained national prominence with a gender dissemination suit against a venture capital firm kleiner perkins. there was a horrific accident on the last lap of the nascar race at daytona. dale earnhardt jr. had just won the race when austin dillon plus car went upside down and went back onto the car and was hit hard. he said he has a bruised arm and tailbone. he was phenomenally lucky. tom: let's continue forward as we give you perspective for the nation of greece and for europe as well. mohamed el-erian wrote an essay yesterday.

robert hormath is with us. thrilled that you could come in this morning. is the european experiment at risk of coming off the rails? forget about greece. cannot come off the rails? robert: it could but i don't the get well. the creation of the european union's currency was designed to pull europe together. now it turns out to be the vulnerability which could fragment europe if it continues. if greece leaves or encounters

major problems and then there is a spread to other countries, if the greeks get a better deal out of this, we want to get a better deal like in spain and portugal so it could change the balance from the current policies to more aggressive policies on their governments to get them to take more dramatic action against the imf and the eurogroup. tom: the core of your work like with goldman sachs is for responsible fiscal policy whether it's the united states or any other nation. is germany leading a responsible fiscal policy? robert: germany is trying to say that if you want more money from europe -- europe has already given them 280 billion euros -- you need to do more things to put your economy on the right track that will reduce your deficits. in fact, the last government was

making progress in this direction. it had a lot of unemployment but the fiscal problems were improving. tom: and then the finance minister resigned last night. brendan: if you want more money a lot of that money went to greece and back to french and german banks. looking at greece, is it a strategic problem or economic problem? robert: it's both. they have had generous pension plans and do a lot of things internally which are not consistent with good fiscal policy. there is a bigger political problem and that is if you do not give greece anything and it

deteriorates and collapses, that is horrible for the great people and horrible for europe. if you give them too much, other governments say why should we do the kind of tough fiscal measures the europeans want us to do? he will start protesting and asking for more liberal terms. there is a right balance. vonnie: has greece back to europe into a corner? robert: they have backed themselves into a corner. it's difficult to get into the dish given to things that europe wants. the germans have made these very clear demands on europe to come round. they are both in a very difficult negotiating position. tom: the idea of irresponsible -- whoever is to blame -- how does it set up vladimir putin and russia? robert: it's hard for me to imagine that the russians will

not try to take advantage of this somehow. i'm sure there are russian agents now in greece. the russian ambassador was met with first when the new premised or took over so the russians will do something but they don't have a lot of money and is not much they can do to help the greeks much. the greeks want to stay in nato and europe and want to be part of the west. they even want to be part of some -- part of the euro. for them to play the russian game -- cyprus has talked to jack lew and a regular basis -- on a regular basis. tom: thank you for being with us. in the next hour, we begin with adam posen of the peterson institute and truly one of america's authorities on the political/economics germany.

stay with us on the crisis in greece, this is "bloomberg surveillance." ♪

brendan: there are dueling press koppers is all over europe. where watching the european commission say the negotiations with the actual referendum did not reflect the latest date of play in the negotiations. we will have more details about what the negotiations -- what negotiations are happening. tom: here is the morning must read it --

robert hormats is with us. this is a social disequilibrium? robert: greece depends heavily on imports of food, medicine and energy and don't have the money to pay for it now. foreign creditors are going to stop selling those things. tom: when does that start? robert: that will start very quickly and there will be huge shortages of medicine and food and you will hear about this on a regular basis. tom: the study you did is if you do that you do sxcript? robwert: they can theoretically

stay in the euro but they won't have enough to run the economy. brendan: they don't have their own energy and they don't have -- robert: people will not take script so easily. companies will close and people will not get food and energy in medicine. tom: paul krugman wrote on this. coming up, the most important conversation for mario draghi today, a conversation with athanasios orphanides the former governor of cyprus. ♪

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now it's easier than ever to manage your account. get started at xfinity.com/myaccount this is a great place to work. not because they have yoga meetings and a juice bar. because they're getting comcast business internet. comcast business offers convenient installation appointments that work around your schedule. and it takes- done. - about an hour. get reliable internet that's up to five times faster than dsl from the phone company. call 800-501-6000 to switch today. perks are nice. but the best thing you can give your business is comcast business. comcast business. built for business. tom: good morning everyone "bloomberg surveillance." vonnie: whatever greek does next it will do without its controversial finance minister.

the government voted against more austerity measures and he said he's quitting. he said european creditors prefer he not be involved in more negotiations. greece will now try to get bailouts to get restarted and the greek prime minister called on the ecb to extend another lifeline to the country's banks. >> our immediate priority is the speediest reopening of the banks for financial stability. i'm certain the ecb understands the economic crisis and the humanitarian dimension in our country. vonnie: the leaders of germany and france will meet to come up with an appropriate response and there will be an emergency summit tomorrow. john kerry is downplaying speculations that a nuclear deal with iran is imminent. negotiators are still shooting for a deal by july 7. >> over the past few days, we

have, in fact, made genuine progress. i want to be absolutely clear with everybody -- we are not yet where we need to be. vonnie: the chairman of the senate foreign relations committee warning -- warned about rushing into a deal that would did the tooling and on iran. president obama is scheduled to make a rare visit to the pentagon today. will ask his national security team for an update on the fight against islamic militants in the middle east. the coalition had 30 a bomb rates over the weekend. the president is expected to hold a news conference this afternoon after hearing the progress report. uber has suspended its service in france because of growing opposition. french taxi drivers staged a violent protest against uber. the french president has said uber must be dismantled.

the cofounder of a well-known natural cosmetics companies it. he gave his name and his bearded image to bert's bees. the company started with products made from beehive wax. it was sold for $925 million three years ago and he died yesterday in rural maine at the age of 80. tom: i hope he got his fair share of that. vonnie: it probably did not matter to him. tom: greece is not cyprus and greek is not iceland. there is paul krugman --

we now speak with athanasios orphanides the former governor of the central bank of cyprus and he hundred hands -- and he understands that the distances greater than 1500 miles. thank you so much for being with us today. why is greece different from the crisis in cyprus? >> a pleasure to be with you. there are some differences but there are many similarities. i would focus on the similarity. the crisis we have is a political crisis. you talked about frankfurt and the role of the ecb but really we should be looking at earl in to understand what may happen. berlin is the entity that determines the outcome. i am very afraid it will also determine what happens in athens. tom: ambassador hormat would

suggest we would not get to july 20. what is it mean for you and greece of you see iou plus or script currency? >> july 20 is the day which is a critical deadline because of the maturing greek government debt that is held by the ecb. let me point out that berlin could get that problem out of the way by agreeing with the other governments to take over the debt. we should not have technical issues like a maturing debt that the ecb holds that will affect negotiations. in terms of the eye are you's, that would not a base of --iou's that would not be a solution. those would create complications and greece. if the greek government were to start paying iou's, it would be

the beginning of the exit of the euro with production avenue currency. however, it will not be the same as what we had in california. california had a government that was credible and the banking system that was backed up by the federal reserve and the fdic. we do not have these conditions in greece. it would be the beginning of the end if they issued iou's. brendan: what would you hope berlin does differently with greece? >> the problem in greece started with the berlin policies in 2010. i'm not hopeful that berlin understands but they should accept the responsibility for the mess they created. in 2010, they effectively conned greece by forcing a program on them that was designed to bail out german banks that had lent money to greece.

this is creating the situation they are in now. the greek debt is unsustainable. the honorable thing for the berlin government would be to admit their responsibility and agree to a restructuring of greek debt along the lines of what the imf suggested last week . we have robert hormats with a question. robert: the imf has says the greek debt is unsustainable. it seems that restructuring it is the beginning of the negotiation to recognize that fact. the credibility of the greek government is different from california as you said. how much can the greek government due to take reforms that are even minimal but a serious nature to take their part of the burden? tom: will we see those reforms

this week? >> i wish we could but i have to tell you that i am not very i mentioned about the responsibility of berlin. unfortunately, angela merkel's government has refused to take responsibility. at the same time in athens there is a government that has proven that they are irresponsible. we talk about democracy and how democracy comes from the ancient greeks. there is no other word that came from the ancient greeks demagoguery. we have a government in greece that has engaged in that. it is not clear they are able to do the right thing. my hope is the european institutions would demand from the greek government a compromise and a compromise from the berlin government.both elements need to move at the

same time if we are going to have any chance of a good ending to this story. tom: how can mario benefit this crisis this morning? what does he need to do to get berlin to a new place? >> the ecb cannot solve this problem. this has been angela merkel's problem and she is to solve it. it would be wrong for the ecb to get involved make political decisions. the number of people would like to pull the trigger and put an end to this but this is not their job. the ecb is a technocratic institution. they should maintain the level of ela for the next couple of weeks if possible to the extent to buy time to reach an agreement. number 2 -- they could resist

calls to be harder or easier. they have rules in many to respect the rules. one of the things the greek government wants them to do is to allow them to use more greek treasury. the ecb cannot do this. this is against the treaty. they cannot engage in monetary financing and cannot add additional liquidity to the greek government. tom: thank you so much. we greatly appreciate the many times you have been with us in the last days. a in the next hour,dam posen will join us from the peterson institute on the political economics of germany. stay with us, this is "bloomberg surveillance." ♪

tom: good morning everyone. we need to digress from greece. here is an asian single best chart. vonnie: there is a little bit of contagion but a lot going on in china. their indexes down another two point 7% after another fresh round of government support.

you can see the s&p 500 is the white line. the yellow line is the chinese index. there is big speculation we saw in china. brendan: the big hit was taken by the smaller cap stocks. that is down 36%. there is a difference between the shanghai overall. tom: long ago and far away, robert hormats wrote to expect the unexpected. what are we expecting from china? robert: the chinese are trying to get a market up because they think it's a symbol of confidence and they want these highly indebted companies to monetize there'd that by creating assets in the equity market to pay off their debt.

that is the big problem, they have to deal with the debt issue and putting the money into the hands of small-scale stockholders is not going to be a long-term answer. vonnie: can they manage the stock market like they have managed the housing market? robert: not to the same degree but the chinese are good at this. no more ipo's and they have put more money into the institutions that manage margin trading. the mutual funds are agreeing to buy more stock. .i think they can do it they understand some of the fraud has to be taken out of the stock market. they don't want it to crash. it is a reasonable policy given their concerns. whether it works over the long-term, probably not. they have to deal with the debt over a sustained basis but this will help avoid a major crash.

tom: let's go to our photos. we have festive photos. vonnie: number three is from ecuador. the pope arrives in south america talk about many issues on his home continent. is the first time he has visited south america in two years but he will not visit his native argentina. brendan: when did the pope mobile become a jeep? vonnie: over the weekend, they had fireworks and this photo is from tom keene. tom: i took 800 photos to get one shot. a massive shout out to manhattan

by sail. they put me in the middle of the harbor. vonnie: did they give you a life jacket? tom: yes, it was great. brendan: tom took a picture of himself before he left -- he had dramamine in one hand and the red sox cap and the other -- in the other. vonnie: i was on the polaski bridge. number one is carli lloyd and her teammates celebrating the world cup win over japan and champagne the locker room last night. she completed a hat trick in 15 minutes which is the first ever. brendan: we wonder whether it's

going to be there moment and we said that 10 years ago. there is a women's soccer league here. the more important player in a picture is megan rapinnot who created all the chances the u.s. got. tom: that's our moment away from greece. this is one of the most important thinkers in europe. where thrilled to bring you daniel gross. he writes transiently on his europe and we're looking forward to this. we will do that next. it's bloomberg surveillance. ♪

tom: the dollar is making a move to new strength of this morning. we are not doing much on the data check but the market is better than it was six hours ago. . vonnie: in south carolina today,

the legislature is expected to begin debate on whether to remove their medical -- the confederate flag from the state grounds. it arose as an issue last month after the massacre at a black church. mcdonald's is going digital in china. it will start testing mobile ordering and payments and is chinese outlets. sales in china fell almost i percent in the first quarter and i was after reports winning the chain with a company that sold expired meat. "jurassic world" was the winner at the box office for the fourth week in a row. .it took an almost $31 million over the holiday weekend. it felt like greece was a movie yesterday. tom: the german government sees no need for talks to resume. brendan: they also talked about

looking back at the angela merkel policies. will move to athens in the real economy. greece has to buy things like medicine. they are one of the largest net importers with italy and portugal. joe weisenthal is in athens now. what indicators do you have from the real economy in greece? joe: clearly, the big story this morning -- you have seen the return of atm lines and everybody saw them last week. there were cameras taking picture of people in lines. you are starting to see that again. that is the big anxiety this week. . the government has urgency to get them open as soon as possible without more help from the ecb that will be impossible to achieve. brendan: are there sufficient supplies of gasoline from abroad

and lamb in greece? joejoe: i think there is a lot of concern about that. there was a quotation in the media about stock piles but there is definitely a lot of anxiety about medicine and food. greece is a big in order and cannot go long especially that went to the draw,. -- the drachma. brendan: we will now move to brussels. help me understand -- you wrote last week that if greece adopts a new currency cannot simply deflate and complete -- and compete. why not?

daniel: because they don't have anything to export. is difficult to her exporting. they have some olive oil and tourism. tourism is going down these days with the negative headlines. brendan: so tourism is and not that is not enough to say the greek economy? daniel: i think this crisis is too big for that. puerto rico is a similar problem. tom: you have written on the tensions within continental europe. i this isan bremer out on twitter -- he speaks to democracy. is it france against germany? daniel: no, it's really greece

against everybody else in the sense that the greeks have taken on a lot of debt under their own democratically elected government. they cannot or the burden anymore. let's come to an agreement. that agreement is still elusive. brendan: one question we have been trying to figure out is -- if the greek government issues scripp an iou, does that automatically mean they are sliding into leaving the eurozone? daniekl: they are already on that slide. it is not preordained that we have another small country like montenegro which uses the euro without help from the ecb. it's possible because of strong policy but it does not look like that in greece now. . tom: thank you so much. final thoughts from robert

hormats - what should the obama in ministration do or jack lew to assist greece? robert: you cannot let them fall which is a humanitarian crisis. if they cannot get medicine or energy or other things to run the economy, there will have to be some help. you cannot let them dangle. they are a nato member so they and the eu and the u.s. have to work together. europe is under siege for many fronts. tom: you mentioned vladimir putin earlier. robert: i think the russians will try their best to weaken greece. if the greek government is angry at the rest of europe, they could vote against new sanctions for russia or do other things. than you have all these isis issues and immigrants coming up. there is a whole syriza problems

europe will face in a destabilized greece will make all the problems worse. tom: thank you so much. the euro is stable. stay with us. ♪

>> this is bloomberg "surveillance."

tom: greece says no. varoufakis quits. he has not stopped talking. they prepare for iou's and a possible return of the drachma. china's markets stabilize. in this hour, adam pozen michael fuchs and daniel alpert. this is bloomberg "surveillance." live from new york. with me, brendan greeley. back early from vacation. he said we have got to talk about athens. brendan: i wear your loathing like a uniform. tom: we will go to athens in a moment. top headlines -- vonnie: emergency meeting scheduled today and tomorrow to confront the crisis and greece. greek bankss are supposed to open tomorrow but might not if. greece rejected a european

bailout. 6 million voted. european leaders are deciding what to do next. one former prime minister says no exception should be made for greece. >> greece should not be given any special treatment. other than a generic understanding that it is inevitable and in the interest of keeping in the euro. vonnie: mario monti, former prime minister of greece. greece may not have a finance minister when talks resume. varoufakis resigned. one lawmaker says his departure will not make talks easier. in china, government attempt to prop up the stock market after a drop -- the shanghai composite rose but only because of gains in big state of companies like petro china.

the government suspended ipos and increased central bank support. and boosted stock purchases. the shanghai composite has fallen 27% in less than a month. john kerry is tempering the optimism in the iran nuclear talks. kerry says negotiators in vienna are not where they should be. talks have gone on for 989 straight days. the u.s. says it will agree to a deal only. -- if it stopped iran's ability to make nuclear weapons. aetna agreed to pay $35 million for humana. anthem's proposed takeover of cigna could be next. cigna rejected a bid last month. both companies said to be interested in humana.

the u.s. is the first three-time winner of the women's world cup. the u.s. raised to a 4-0 lead in the first 16 minutes with three goals by carli loloyd. avenging the loss to japan four years ago. brendan: goalie out of position. from the midway line -- unbelievable. from 50 yards out, unbelievable. vonnie: a phenomenal world cup. brendan: they have improved. they said they needed to improve after the group around and that is what they did. we have entered the hour of silly headlines. "dijsselbloem says referendum does not bring solution closer." vonnie: he has been negative from the start. all the headlines from dijsselbloem are just -- brendan: he also said no easy solutions. tom: watching the headlines. we will have them for you. a quick data check. things are calming down.

as jonathan ferro said, ugly. futures -13. a euro 1.1032, better than good. it is the morning after. for greece and europe, the focus will be on draghi. a july 20 cut off. robert says we will not get to it. greece has to get to tomorrow july 7. front and center is a lack of cash. the potential of an issue of ious. hans nichols is in berlin. erik schatzker's in athens. it is all about the ecb and e la. what does mario draghi mean for athens this morning? erik: the best talk the ela being emergency liquidity assistance. the lifeline to greece's banks banks which was frozen a week ago friday.

the spanish economy minister said earlier today that there can be no ela without a bailout program. that means alexis tsipras the prime minister, has his back against a wall. the banks cannot reopen without more emergency liquidity from the ecb. the minister says there cannot be more ela without a program. which effectively means banks cannot open unless there's a new agreement on the bailout program here the likelihood of that happening is so slender right now. tom: i believe the finance minister was shown the door this morning. phil will replace varoufakis -- who will replace varoufakis? erik: that is the right way to frame it. this was not a decision by mr. varoufakis regardless of what he says. he was shown the door by alexis tsipras. whether has to do with politics or the european creditors is

something we are waiting to determine. there are three front runners to succeed. one who he replaced in april. stathakis, the deputy prime ministers. and dragasakis, the economic minister. all of him speak english and were educated mostly in the u.k. seen as qualified to sit down with the europeans. tom: now we have to move onto the action. brendan: in berlin with hans nichols. you've been following the eurogroup for the last six months. does varoufakis' make negotiations easier in the future? hans: it does not make it more difficult. it is a marginal change they antagonized creditors. i know you are going to be interviewing the vice-chairman

of the european council later. he says that the debt relief deal in the 2012 offer is off the table. they are not even talking about debt relief. creditors are moving away from the old proposal. things look very bad for greece from the creditors' side. brendan: angela merkel's spokesperson gave a press conference and said we did everything right here to what was your most significant take away from that? hans: he said conditions are not right for a deal. he did leave room open for a deal. if mr. tsipras thinks he has a 61-39 majority and he can bend on things he was unwilling to bend on two weeks ago, he can sign a deal. it comes down to what does mr. tsipras want? creditors have been clear, they need to reform the economy and then they can get more money.

tom: hans nichols, thank you. erik schatzker and athens as well. we need perspective. in the middle away from an athens centric or lynn centric view. daniel out has tried to strike the middle. he is with westwood capital, where he puts money where his mouth is. one of the greatest things i saw in one of the notes you forwarded to meet was someone saying it is about the people in greece starting, which is tangible. at the same time, enough, this is a mess wehrhere all parties are guilty. daniel: the centrist review is this has to send it into a three ring circus with no ringmaster. the fact that the no vote was strong indicates that european technocrats misread the situation. many political leaders were thinking this would be a close margin victory or lost. it was completely wrong. now we are looking at the ecb,

you have people out there this morning running around saying the ecb can do nothing without a deal on the table. that ela cannot be pursued. the ecb is the central bank to all banks in europe. tom: draghi is going to step up? daniel: i do not know but he is probably thinking very carefully -- tom: is the leader of the circus christine lagarde? daniel: i'm glad you brought her up. you have the imf with what happened last weekend the report they released. very interesting timing. to say that this has been a charade and they cannot pay the debt. you have her sitting there pushing hard for a resolution. i believe by this point you have washington chiming in more strongly than you did last week. they do not want to see a meltdown. the big news today really has to be hollande and merkel meeting in paris.

that is where the decisions are going to be made. that is where the decisions have to be made. they have to sweep aside tight no crowds we gave you your chance. you really blew this. with got to move on. brendan: and for the last three decades the most important decisions have rested with germany and france. is it possible to say we had the shock of the relief? tsipras' gambit worked? daniel: absolutely. i do not know how anyone could deny that. it was a success. he read his people, the social mood, quite accurately. when i saw the election results coming in, i'm sure you had the same feeling. tom: we will have to come back. albert will be with us for the entire hour. coming up adam pozen on the political economics of germany. stay with us. ♪

tom: good morning, everyone. futures improve -11. morning must-read. brendan: really good opinion reporting out of athens. this -- "wolfgang schaeuble, the despised german. tsipras does not say who the terrorists are, but most greeks know who he means." tom: he is the bad guy. brendan: dan alpert, westward

capital we were talking about how tsipras is a leader. he needs a villain. is schaeuble the right villain? daniel: he's the perfect villain. he is representing a political constituency in greece. it is not exactly the same as merkel's. it is further to the right. he's trying to be the one defending a treaty drafted in the 1990's that quite frankly every member of the eurozone has violated in one way or another. consequently, he's making an argument that is difficult -- brendan: at the time, he argued for a tight core of the eurozone. not spain, not greece. just germany and benelux. daniel: if we had that today we would have a euro at 1.50 germany would not. enjoy the advantage it has. tom: pimco has said the same thing. very quickly, when i look at

schaeuble merkel, they need to understand that the academics say greece must have growth. can germany impart nominal growth on greece? daniel: it is difficult in a fixed currency regime. you have one big surplus country -- tom: so they have to go to the drachma and then import growth? daniel: i have been an advocate for a euro-b for the periphery. a controlled euro. greece needs inbound investment. whant can germany do, of course they are not going to do it. build a few also plants. tom: they will have newly valued euros increasing wealth to put in greece. brendan: i take your point. germany has been saying greece needs to get more competitive. the obvious thing to do -- daniel: de valuation is very

painful. you cannot ask people to do that. they do not wake up in the morning and say i will take a pay cut. if there expenses do not go down because they're in a fixed currency regime, they cannot drop wages. when they do, 60% of people come out and say we are done. tom: dan alpert with us. coming up, adam posen of the peterson institute on the future direction for germany. stay with us, bloomberg "surveillance." ♪

tom: one of the outcomes of the crisis in europe -- dollar strength. a new out in the last two hours. vonnie: more than a million people expected to attend a papal mass in ecuador. a crowd greeted pope francis yesterday. the first stop of his nine-day trip to south america. he will also visit bolivia and paraguay. he will skip his homeland, argentina. reddit's interim ceo is under

fire appeared a petition calling for the removal of alan pao -- e llen pao drew more than 130,000 citizens. pao made headlines when she accused a gender capital firm of gender bias. 13 nascar fans hurt after a huge finish line crash at daytona. dale earnhardt jr. had just won the cook zero 401 austin dillon's car hit a fence p1 fan was hospitalized. tom: they hit the grass, bad things. vonnie: very lucky. tom: let's continue with our coverage of europe. focus is on greece. all eyes will turn to the future of europe. that always suggests a focus on germany and france. and on the peripheral nations as

well. adam pozen is a former bank of england policy maker. dr. posen has spent considerable time understanding the political economics of germany. dr. posen, let me begin with a tweet. "i hope draghi is watching the greek paoll." how will the ecb get banks open in greece so greek people can move on with their life? adam: jeff sachs is right to say this is the critical step here do you keep increasing ela, emergency landing assistance to banks and let people withdraw deposits? no question the ecb will allow that tomorrow. they want to let the political process unfold and i do not want to be seen as shutting down euro- membership for greece.

that is a political decision about their paygrade. on the other hand, they cannot just keep providing ela if there's going to be no deal. the deposits leave and the banks have nothing left. the has to be and -- an end or a deal. tom: you're an expert on the history and political economics of germany. is germany prepared for a greece with iou's, scripts or a new drachma? adam: germany is prepared but i think we are going to get a dlp or we have made it more painful than it had reason to be. the greek people suffered and we have seen losses in markets as well. i think dan alpert had one thing wrong. schaeuble is a europeanist. he's more european than merkel.

the issue is generational. as we moved away from the coal generation that set out the euro, you are losing the people who remember the political purpose of europe. you are seeing people in germany -- not so much merkel but merkel's backbenchers -- who see it in monetary terms. in tghe end -- in the end, i think the german leadership realizes they have a mission to keep europe together. tom: this is why it is so important to have adam posen the generational shift. brendan: i talked to my friends in germany. one thing i'm shocked by is how differently they see the greek crisis from how we see it. what has to happen in the german electorate for angela merkel to have the latitude to get to a deal? adam: good question. my experience conforms with yours. in greece the younger people voted differently than the older people.

it is on both sides of the divide. in germany it is no longer a question of angela merkel getting latitude. it has got to the angela merkel deciding to use political capital. she's the most popular politician in germany in decades. schaeuble is temporarily upgraded and popularity in germany while he gets demonized in greece. it is like robert rubin said at the start of his memoir. the toughest call he ever made while t treasury secretary was the next in bailout. merkel has to decide she has to do it. brendan: by use political capital, i assume you mean spend a little and become less popular. we have dan alpert nodding to your correction of his statement. i will let him jump in. daniel: good to hear from you. the question i have -- the european government the

northern governments have been telling people they are not going to take losses on the debt that was socialized. we had all the debt removed from the bond markets and put at the ecb at the individual central banks. and at the imf. does she have enough political capital to be able to turn back to her population and say there are going to be some losses? adam: you are right on the economics. that is what happened and that is the lie that has been told. no different than the lie japan played in the late 1990's. no different than eli the americans played in 2009 2010. she's going to have to try everything she has until now. extending payments, extending duration. everything that does not look like a write-down. in the end, the money is gone. the money is no longer there. that really matters. tom: adam posen with us.

coming up ambassador daniel skaagaard with his experience of investor to greece. from new york city, bloomberg "surveillance."

tom: good morning. we welcome you to bloomberg "surveillance." our top headlines. vonnie: greeks anxiously awaiting to see if banks reopen tomorrow after voters rejected the european bailout terms. banks might stay closed if backing from the european central bank is not restored.

more than 6 million people to the polls yesterday. nearly two thirds of those eligible. a crisis could force the government to issue iou's. one economist said that would be a slippery slope. greece might not have a finance minister present when talks resume. yanis varoufakis resigned, no replacement named. john kerry is saying speculation there will soon be an iran deal. the secretary of state says negotiators still face hurdles. secretary kerry: we have made progress. i want to be clear with everybody -- we are not yet where we need to be. vonnie: the chairman of the senate foreign relations committee bob corker is warning against rushing into a deal that is soft on iran. president obama is scheduled to make a visit to the pentagon. he will ask his national security team for an update on

the fight against islamic militants in the mideast. the coalition flute -- flew 38 raids over the weekend against targets. the president is expected to hold a news conference this afternoon. the world's top ranked golfer might miss the british open. rory macklemore ruptured a ligament in his ankle. rory mcilroy is the defending champ. what was he doing playing soccer? tom: what do you do when you are a golfer? brendan: this is in contracts. a lot of athletes have this they are not allowed to play anything else because this is what happens. tom: let's go to one of the most important quotes with adam posen . this is from february. a cool economist out of oxford. "the size of the collapse in greece is similar to the file in

irish output from 1843-1853. the great irish famine. and while the suffering in the latter is obviously of a different order, the attitude of some in the eurozone is as misconceived as most english politicians." adam posen, there is history here. if you were advising chancellor merkel or president hollande today, what would be the posen urgency that would be necessary? what would make them more urgent to get things fixed? adam: you are right to invoke that economist, who is right to invoke the irish famine. you have got to ask chancellor merkel and president aligned are you willing to blow up the euro area for the sake of less than 2% gdp? the answer should be no. and just repeating to them the money is gone the elections are another year and a half away. make this problem go away.

you do not want the politics of this problem sticking around for the next year and a half. tom: brendan greeley, jump in. barclays says 3.5% exposure to the entire comment from greece. -- entire continent from greece ., brendan: is interesting to hear the comment on insisting on principle. one thing i am curious about does germany have recognition whatsoever that a huge chunk of money it contributed to greece went right back to french and german banks? adam: of course. they all know that. they do not want to admit it. it is a crime -- this is why they are morally culpable. if you want to talk about moral hazards, it is not moral hazard on the part of greece or ireland. it is moral hazard on the part of european banks starting with germany and france who made bad loans. if you want to convince hollande

and merkel that is not what you say. what you say is the u.s. government should be saying you get to have either a weaker euro and no fixed -- and fixed greece . or you do not fix greece and we are going to screw you on the euro. you have got to give us one. tom: you have a great resource at peterson. what is dr. kierkegaard saying needs to be done? adam: my understanding is the latest from him, who everyone should be reading the greeks have to agree to some conditionality. otherwise, no deal. tom: adam posen, thank you so much. brendan: two years ago i talked to ireland' finance minister. he said you make them feel guilty and private. in public, you say the right things. tom: that did not happen with tsipras. there it is. negotiating tactics from greeley. a data to check.

better than six hours ago. futures -14. euro 1.1032. oil south, brent crude and nymex below $55 a barrel. brendan: this is bloomberg "surveillance." i am brendan greeley with tom keene. europe trying to make sense of yesterday's no vote in greece. one of them is the european commission's vice president for euro policy. what is your understanding of what greece said no to yesterday? >> good morning. the negative outcome of the referendum certainly is complicating things. it is creating a gap and makes reaching an agreement more public it appeared brendan: --

markup located. -- moer -- it is creating a gap and makes reaching an agreement more complicated. brendan: what can the commission do? valdis: previous programs have expired. currently we do not have a european program in place for greece. greece has applied for a new program. for the european commission to negotiate, they need the mandate from the eurozone countries. only then can we start negotiating with greece. tom: you studied electrical engineering at the university of maryland. you know what a slew rate is. are the rates so dangerous that we need rapid response? are the functions so changed from sunday that we need today or tomorrow to see some real headway?

valdis: i would say there are two parts to this question. first is really what happens in greece how do we set a new greek program in place? second, to prevent a crisis from spreading to ensure financial stability in the euro area. on this we have all the necessary tools. to ensure financial stability. tom: this is fabulous except you have no money in greek banks. brendan: go terps. i'd argue you have a third problem -- the problem of a humanitarian catastrophe in greece if this is not resolved. what can the commission due to address the human problem in greece? valdis: european commission is certainly ready to stand with

the greek people. we are setting up a new group to work to ensure that greece gets eu budget support and uses it as effectively as possible. there are lots of means available also to deal with the social problems. vonnie: minister, you were prime minister of latvia for a long time. you're overseeing social dialogue in the european union. it's a dialogue and connections get too poisonous, what is to become of europe? valdis: it is quite clear that the outcome of the referendum is certainly, has not improved goodwill towards the negotiations. it is still important that we overcome this. that we sit together and find a joint solution.

but for this it is important that all sides, including the greek side, behave responsibly. responsibly understanding all the difficulties of the situation. tom: thank you so much. greatly appreciate it. some interesting comments about the straight talking direction. and yet there's cacophony in greece. brendan: valdis dombrovskis formerly of lithuania and now -- excuse me, latvia. the baltic countries have a proportionally greater exposure to the esfssfs if it fails. tom: does germany care about the smaller nations? adam: i think they actually do care about their neighborhood vonnie:. vonnie:the ones that buy their products. daniel: thedaniel: ones schaeuble -- daniel: the ones they trade with. he basically said we need political direction.

the euro crats cannot do this. tom: dan alpert, thank you. coming up, a u.s. ambassador glass faced crisis. ♪

tom: good morning, everyone.

tom keene with brendan greeley and vonnie quinn. a quote, such a great source for us here. an elderly relative of mine left his village in greece to find a job and happens at. 11 he did not stop working for five decades. among 60% of greek pensioners who take home $35 above the official poverty threshold. a nice snapshot of athens and the realities of greece. joining us is a true u.s. professional on greece and diplomacy in action. daniel speckhard is the former u.s. ambassador to greece at a time of crisis as well. he joins us this morning. we are thrilled to have you. what is different this time around than 2010? daniel: the big difference is that you are dealing with the far left government that has

never governed before. this is an inexperienced group of people. you have seen it play out over the last five months. tom: jack lu knows, as i think others do, that these efforts, we become overcome by events. what are the events that will change the dialogue in germany? in france and athens? daniel: i think what is happening on the events side politics is overtaking the economics of this. each side plays to its domestic audience and it gets very difficult to solve this. in greece we knew already, we knew in january when they voted this government in. they are tired of austerity after five years. in germany, 75% of the citizens do not want to give greece concessions. they are tired of sending billions of dollars to greece. it is the politics that has made this difficult. the only way this is going to

change is if there is leadership that says i'm not going to watch the polls, i'm going to do what is right. brendan: ambassador, what did we learn what the onnlk -- the no vote? a 61% measure of support for syriza? daniel: that is difficult. they muddied the waters by saying this was not a vote to stay in the euro, it was a vote to end austerity. we already knew greeks are tired of austerity. i think syriza does not have 61%. they do have 61% of the population saying i do not want to do more concessions stuff. i do not have anything more to lose by trying to do an imf program. tom: i want to come back with ambassador daniel speckhard in a moment and talk about his efforts at lutheran world relief. what it means for the social fabric of greece.

the charity that will be necessary to stabilize greece. coming up on bloomberg, hans hume will join market makers this is markets stabilizing this morning. stay with us on bloomberg television and bloomberg radio throughout the morning. a crisis in greece. futures 1down 16. ♪

tom: good morning everyone. let's get to our headlines. vonnie: lawmakers in south carolina will debate the confederate flag today. the flag flies on the grounds of the state capital. there's a push to take it down after the killings last month at a predominately black church. one plan would move the flag to a museum. mcdonald's is going digital in china. the chain will test mobile ordering and payments. yum! brands is joining a similar trial. mcdonald's' sales and china fell 5% in the first quarter. dinosaurs are big footing the competition at the box office. "jurassic world" pulling in nearly $31 million.

"inside out" and "terminator." were. close behind. tom: "inside out" i saw it. it was good. one of the great research notes over the weekend was off the london desk of barclays. let's look at this before we bring back ambassador speckhard. iou's would trade at a secondary market to overcome the needs of domestic transaction. the drying up of euros would lead to a rapid evaluation of this parallel currency and therefore a surge in inflation. a drag on purchasing power. from barclays as we move towards the drachma. daniel speckhard with the lutheran world relief fund. ambassador, if we get script, a new drachma that is amazing hardship.

with your experience at the lutheran world relief fund, what would happen to the social fabric of greece? daniel: the real problem in any country that goes through a catastrophe like this is that it is the poorest who suffer the most. it is not equally across society. after five years of austerity the people at the bottom are the ones hurting the most. it is interesting to note that in this country you have anywhere from half a million to one million illegal immigrants coming from the middle east and afghanistan. these people are already on the edge. they are. tom: told once but a sophisticated officer within the greek government that money outside greece would come flooding back in with proper currency devaluation. do you agree with that? the greek people around the world would pour money in for investment to get growth going? daniel: i'm sure there are

strong ties in the diaspora. i do not think you can expect that to lift greece out of its current challenge. you expect, greece is a great country in terms of possibilities. in tourism and other areas. if they ever got policies right there are investors interested. in the current situation, it is kind of unimaginable. brendan: i was surprised to read the words "social unrest" in a research note from a bank. what could the scale of the unrest be in greece? daniel: it is a serious issue. the syriza government was very far left. they had only 5% of the vote when i was there. they are made up of leninists, marxists and anarchists. they have a tradition of street protests. some of it -- not syriza -- some far left elements in greece have been violent and militant.

the u.s. has had five assassinations since the 1970's from very radical groups in the country. if the country devolves into a situation where people cannot eat any, you can expect significant turmoil. tom: thank you for being with bloomberg "surveillance." daniel speckhard with public service from 2007-2010. we continue with dan alpert. you combine the different themes of the moment. let's start with the moment for the ecb. what is the moment for mario draghi? that event good two years ago. daniel: at this point he needs to make a tough decision. unless you put a blindfold on i do not know how you can come to the conclusion that the greek banks are solvent. most of the loans they have are not collectible in euros. he needs to bite the bullet and deal with that issue.

not permit the type of social unrest ambassador speckhard was talking about. which would no doubt result. tom: can janet yellen, mario draghi do that? daniel: there is no relationship between the ecb and any other central bank? it is a dysfunctional system. this is the final move towards that dysfunction -- tom: is draghi different? he can have a political impulse? brendan: i think the comparison to draghi is fair with yellen. yellen does things when there is no political will to do anything else. we cannot do fiscal policy. in europe, it is the same. the germans cannot change the way they think about the world. mario draghi is, like janet yellen, the only game in town. daniel: in that respect i agree. the ecb solution is very temporary. it opens banks put liquidity

into the banks. they cannot continue doing it. some of the nations are going to object strongly to doing that without a bailout deal on the table. the bailout deal in and of itself is a temporary solution. let's say that come down to a reasonable level of surplus, 1.5% or 2%. they kill all the crazy lump sum payments in the near-term. push everything out. that is not going to revive the greek economy. tom: where do you get growth? daniel: greece is not competitive within the eurozone. that is clear to everybody. what they should do in my opinion -- i have written about this -- this is true probably of a couple other countries. they should an ounce a -- they should announce a g-euro. don't call it the drachma. they say we will enlist the help of the ecb in defending that currency. 60 cents to the euro, it will

float back to a level near the euro. the policy should be upfront this is temporary. when -- when the g-euro recovers, we will eliminate it. a timeout for greece. tom: dan alpert, thank you for being with us. my agenda this morning is simply greece. i will make this quick. it has been our theme. what i am watching is the iou issue within athens. that is about feeding people. that is the first. we will have continued. brendan: pharmaceuticals as well. i am looking at china. comparing the shanghai composite to the actual smaller cap stocks within the composite, they are suffering the worst. there is little it seems like china can do to fix this apart from watching. vonnie: on my agenda is the iran

nuclear talks. we were supposed to have a deadline tomorrow. indira is in vienna as the deadline looms. maybe shifts a little bit. the latest headlines is that this may extend to july 9 and perhaps even further. what are you hearing? indira: that is what the iranian delegation has told us. as a flat night, they say there are major differences between the two sides, specifically on sanctions relief. for the western side, all the attention so far for the last several months has been on the issue of access to verify iran's compliance with the deal, as well as sorting out questions about what iran's past military work may have been what iran says now we need equal measures on our side to make sure we are going to get sanctions relief. iran is saying it might take longer. vonnie: does this stretch into august and even the fall?

indira: sorry i could not hear. vonnie: does this stretch into august? indira: what we are talking about is that sanctions relief has been given until the seven the extension of the current deal. they would have to extend it further appeared from the u.s. point of view, they would like to get this done before the 10th of july. that is when the corker bill kicks in. congress would get 30 days to review the bill -- rather, they would get 60 days. some major things between the two sides are what to do about the arms embargo at the u.n. level, which the u.s. would like to keep. iran wants $100 billion in frozen assets given up at the front end. tom: indira thank you so much. in vienna this morning. we will continue our coverage. bloomberg "surveillance,"

"market makers," front and center, greece. stay with us, this is bloomberg "surveillance." good morning. ♪

♪ >> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. stephanie: good morning.

i am stephanie ruhle. stop thinking about your fourth of july fun, serious business today. matt: i am matt miller. we hear from erik schatzker in athens. stephanie: it was a remarkable weekend for many reasons. fourth of july, my number one holiday. u.s. women's crushing the world cup. and the sunday vote in greece. matt: and the grateful dead. the final shows of their to her. it was crazy, because i was so excited about the greek news in a fascinating way, and then women's soccer was -- blew me away. stephanie: 16 minutes, four goals. i was biking on the reach. i could see every house watching it. an extra married -- an