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Greece votes ‘No ‘, ‘Grexit’ now looms
July 5, 2015, 7:14 pm

By voting no, Greeks have turned their backs on austerity and reform measures demanded by their European creditors [Xinhua]

By voting no, Greeks have turned their backs on austerity and reform measures demanded by their European creditors [Xinhua]

Greece has voted against austerity measures suggested by European creditors as part of a bailout package to aid the government to repay its $350-billion debt.

At 22:00 Athens time (19:00 GMT), the ‘No’ vote appears to have won in all 56 electoral districts in Greece.

With 50 per cent of votes counted, ‘No’ received nearly 61 per cent of the vote; ‘Yes’ received nearly 39 per cent.

The interior ministry said that voter turnout was over 50 per cent, in a preliminary count.

According to Open Europe, an independent think tank, turnout could be as high as 56 per cent.

A minimum 40 per cent voter turnout is required for the referendum to be considered valid.

Thousands of government supporters and those who supported the OXI (No) campaign have already started celebrating in public squares.

That means they have now empowered the leftist Syriza government to hold its ground in rejecting the reforms – cut welfare and public spending, such as on pensions, but raise taxes – demanded by European creditors.

The question now is whether the European Union will force Greece “out” of the eurozone and deny it the right to use the euro currency.

In a German radio interview ahead of the referendum, European Parliament head Martin Schulz said that a ‘No’ vote means Greece will have to use a different currency.

How they’re going to do that remains a challenge. There are calls for the banks to reopen on Monday; the finance ministry has pledged to reopen them on Tuesday.

The vote came as Greeks’ shock turned to anger at how the situation was allowed to deteriorate to the point where they have to queue outside automated teller machines (ATMs) only to withdraw a limit of 60 euros, or $66.

Many have been hoarding food – non-perishables and milk, or stocking up on fuel.

The ‘Yes’ camp is angry at the government and the ‘No’ camp is angry at the EU.

“The problem with this referendum is that the question posed is not very clear so people are interpreting it based on their political beliefs and the politicians are encouraging this,” says Yannis G., a marketing executive in Athens.

But as he, and many Greeks, explain it, the country is united on the belief that the EU-imposed austerity measures since 2009 have devastated the Greek economy.

They are divided, however, how to proceed from there.

The ‘No’ camp believed that their vote would convince European creditors to back down in order to keep Greece in the eurozone. This approach has been encouraged by the leftist anti-austerity Syriza government.

The ‘Yes’ camp, on the other hand, believe that accepting austerity measures – while acknowledging their negative effects – is the lesser of two evils, Yannis says.

He says he voted ‘Yes’ because “I believe our European future is at stake and that’s more important to me than anything else”.

Difficult times ahead

With 40 per cent of the vote counted, nearly 61 per cent of Greeks voted against the EU austerity and reform measures [Xinhua]

With 40 per cent of the vote counted, nearly 61 per cent of Greeks voted against the EU austerity and reform measures [Xinhua]

The next week for Greece will be pivotal irrespective of the referendum results.

The ‘No’ vote throws the ball into the European Commission’s court, but this is a huge gamble for Tsipras. Despite the win for his campaign, there is a risk that some European creditors could harden their positions.

There may be nothing to celebrate by the end of the week.

IMF chief Christine Lagarde and German Chancellor Angela Merkel had earlier expressed optimism that Greeks will vote “Yes”.

Both have also said that the eurozone would not suffer greatly in the advent of a “Grexit”.

Meanwhile, German media reported that Merkel would meet with French President Francois Hollande in Paris on Monday to discuss the referendum results and the next step for Europe.

However, a surprise solution could come from Germany, Greece’s biggest creditor and at the same time it’s greatest critic.

On Saturday, German Finance Minister Wolfgang Schaeuble appeared to air a softer tone – if not a third option – by suggesting that a “Grexit” could be temporary until Greece fixes its economy.

“Greece is a member of the euro zone. There’s no doubt about that,” he told German media.

“Whether with the euro or temporarily without it: only the Greeks can answer this question. And it is clear that we will not leave the people in the lurch,” he told the daily Bild-Zeitung.

Such a third option could mean that Greece would have to resort to the traditional drachma currency.

What is certain now is that Greece will for the next week or two face uncertainty that will rock European and global markets.

The irony is that while the Greek government maintained its anti-austerity position at the talks in Brussels, the economy grew weaker over time, thereby now requiring more financial assistance.

But Greece defaulted on its $1.76 billion debt repayment to the IMF on June 30 and is therefore no longer part of a European bailout regimen.

Tsipras now has to go back to Brussels and face European finance ministers – if they are still willing to meet with him – and renegotiate a new bailout program.

How the European Central Bank (ECB) reacts will be key.

Two weeks ago, the ECB increased the amount of the emergency lending (liquid) funds from $94.3 to $95.4 billion.

But now it will have to decide whether to cut off emergency lending (liquid) funds, and therefore force the Greeks to seek an alternate currency.

The status of the Greek banking system should also provide clues in the coming week.

On June 18, Greece’s Central Bank warned that the country would soon find itself in the midst of “an uncontrollable crisis” if it had to exit the eurozone

“A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability” if a deal doesn’t come through, Greece’s Central Bank said.

Such fears raise the likelihood that once banks reopen there could be a panicked rush to withdraw capital.

These are the risks ‘Yes’ voters such as marketing executive Yanni G. have been worried about.

“[Syriza] have taken unacceptable risks by isolating us from our European allies and jeopardized the country’s welfare without producing any tangible results,” he told The BRICS Post.

Tsipras will have to show his supporters and the electorate that he can deliver tangible results. He is likely looking to the EU to soften its austerity demands.

By Firas Al-Atraqchi for The BRICS Post

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