After Historic ‘No’ Vote, What’s Next For Greece?

Greek voters delivered a strong message to Europe’s political and financial leaders today, rejecting the latest terms of an EU-led bailout deal in a vote that could redefine and reshape the continent’s economic landscape, and the role of Greece, within it.

Voters in every voting district in the country rejected the latest austerity package by a whopping 61 to 39 percent margin, handing Prime Minister Alexis Tsipras and his left Syriza party a huge boost that it hopes will strengthen its leverage during another round of negotiations on terms to help finance the country’s staggering debt obligations.

Addressing the nation in a live televised address, Tsipras said, “I understand that voters have not given me a mandate against Europe, but a mandate for a sustainable future.”

But he also made it clear that “no easy solutions” lie ahead.

Indeed, the vote in reality settled little, since the terms voted on were no longer on the table, and even carried with it the real possibility that Greece may be forced out of the eurozone. That’s not what Tspiras wants. And neither do some 80 percent of Greeks. But that appears to be the battle line that was drawn on Sunday.

It does, at least momentarily, strengthen Tsipras, and Syriza, who encouraged the no vote, arguing that it was the only way for Greece to secure better terms. EU leaders have argued the opposite throughout the week, saying that a ‘No’ vote in the referendum was a vote to leave the euro, and possibly even the EU.

Tsipras’s hand was already strengthened earlier in the week with the release of an IMF report which essentially put into words what many already knew: that the current austerity approach to the debt was not only untenable but disastrous. As economist Joseph Stiglitz, a Nobel laureate, pointed out last week:

“The economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.”

Those are figures and consequences nobody is debating.

Tsipras took a big risk by calling the referendum, and it paid off by clearly illustrating the strong public backing behind him. Many in the troika assumed an opposite result; instead it delivered what is for them now the worst possible nightmare: a democratization of austerity that could spread to other troubled economies in the eurozone. It’s also an embarrassment.

European leaders have already announced a eurozone summit for Tuesday to discuss, well, something.

What’s Next?

Nobody knows. Anyone who says they do is lying.

What’s not is an admission by the EU that they’re at least partly to blame for the Greek situation.  That said, some creditors might take the vote as a sign that some flexibility is needed, and to provide the Greek government with the time needed to make real gains in its fight against systemic corruption and the overhaul in its tax system. As Greek Finance Minister Yanis Varoufakis said in a February interview with Zeit: “..We’re dealing with a system of cronyism and corruption. That’s what we have to tackle. But, instead, we’re debating pharmacy opening times.”

Conversely the creditors might just simply dig in their heels, as many already hinted they would in the week leading up to today’s vote and throughout Sunday. There was in fact no shortage of threats and doomsday scenarios since the referendum was announced eight days ago, from both outside actors and from the Greek media largely run by the country’s oligarchs — scare tactics that clearly failed, at least as far as the referendum was concerned.

It’s no secret that most of Europe’s political leaders, the financial institutions and the banks have a strong distaste, dislike and even disdain for Tsipras and Syriza, beginning with their challenge of the terms of austerity in the first place. That Tsipras played the bad hand he was dealt exceptionally well and won –at least for tonight—won’t win over too many friends from those circles. Germany and The Netherlands have already indicated they wouldn’t miss Greece in the eurozone.

Instead, it leaves him bracing for even more difficult fights ahead against European powers who want nothing less than regime change in Athens, popular will be damned. Those ambitions won’t change with today’s vote.

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And for the record, Today’s Pic du Jour, the blog’s 538th straight, was snapped on the island of Paros, Greece, on 16 Sept 2009.

 

3 Comments

  1. Jean Reinhardt says

    Apparently, senior European and European Central Bank (ECB) officials had agreed to threaten Ireland with national bankruptcy if the government made any attempt to burn bondholders. Maybe we should have done what Iceland did, :O

      1. Jean Reinhardt says

        Thanks for that link, it’s so true. Debt forgiveness is relative, isn’t it? It depends on who is doing the forgiving and how short their memory is.

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