News Analysis: Can a deal with serious reforms, less austerity for Greece reachable?

After Greeks rejected creditors' bailout terms in Sunday's referendum, renegotiations between creditors and Greek authorities are still possible and the best outcome for all sides would be a "real deal with less austerity but serious reforms in Greece," European analysts have said.

RENEGOTIATION POSSIBLE BUT NOT EASY

In Sunday's referendum, 61.3 percent of voters were against the debt deal, compared with 38.7 percent voting in favor.

European Parliament President Martin Schulz said an immediate renegotiation is "necessary" and "possible" but depends on Greek proposals.

In a statement made late Sunday night, he urged the Greek government to make "meaningful" and "possible" proposals in coming hours for renegotiation. He said that "it is now up to Greek government to make proposals to convince the other 18 member states of euro zone and the institutions in Brussels."

European Council president Donald Tusk has also announced the holding of Euro summit on Tuesday to discuss situation after Greek referendum.

"Following the referendum in Greece, I believe that we should urgently meet at the highest political level to discuss the situation and possible ways forward," Tusk said in a invitation letter to Tuesdays' Euro Summit.

It seems that there is a possibility for both creditors and Greek government to go back to the table to negotiating a new deal. However, European experts said to start renegotiation is not an easy thing.

"First of all, it is a rejection of the creditors' offer that was on the table one week ago. We will see new discussions now. However, it will not be easy to come to substantive discussions of a third program," Guntram Wolff, director of Brussels-based think tank Bruegel, said.

Wolff said to start formal negotiations, the Bundestag and other parliaments have to agree, noting that the political willingness for this "has lessened dramatically" after the no vote.

"Negotiations might well start again. But the creditors will just refuse to budge," Danniel Gros, director of Brussels-based Center for European Policy Studies, told Xinhua.

GREXIT?

Experts also said that Grexit is a "real possibility" though it would be "very costly" for Greece and for the entire euro area.

"Legally Greece cannot be forced out. Practically it could remain only if the government balances its books, which seems very unlikely now," Gros said.

Gros said the "real action" of the European Union (EU) will then be on the banks. "The ECB cannot increase ELA and cash will soon run out (for Greece)," he said.

"The stance of the EU or the EFSF/ESM (European Stability Mechanism) is thus not so important. The key is the action by the ECB, both on ELA and action by the Single Supervisory Mechanism (SSM), which might declare some Greek banks insolvent, which then might lead to a direct conflict with the Greek government, which will be happy about every occasion that comes along to put the blame on the EU," Gros explained.

Noting that Greece has already defaulted on the International Monetary Fund (IMF) on June 30, Gros said Greek default on the European Central Bank (ECB) later this month "will be inevitable in case of a no vote."

"Thus the banking system in Greece will collapse even further. The economy will also head south and probably people will stop paying taxes. As the government cannot pay salaries and wages, law and order might break down," he said.

Gros said, in case of Grexit, the ensuing devaluation of a newly-introduced currency in Greece will not lead to much export growth in the country, considering the structure of Greece's export products.

"REAL LEADERSHIP" NEEDED FOR BEST OUTCOME

Since last Monday Greek banks were closed and capital controls imposed to avert the banking sector's collapse after the European emergency liquidity aid to the local banking system was cut off.

Greek officials have admitted that ATMs will run out of cash very soon with no more financial support from creditors.

Wolff said he would not exclude another round of negotiations during which banks remain subject to capital controls though Grexit is a real possibility.

"The resulting deal may be slightly more favorable to Greece but I expect creditors to be reluctant because they really feel that they are being held to ransom," he said.

Wolff said the best outcome would be "a real deal with less austerity but serious reforms in Greece."

"This is still possible and it would require real leadership in Greece and in other euro area countries," he said.

"Creditors should understand that generosity is in their interest because Grexit would be more costly. But creditors should not compromise on demanding structural reforms. Syriza needs to deliver a transformative programme for Greece that ensures competition, limits corruption and ensures fair taxation," Wolff concluded. Endit