Home >news >world >Greece’s ‘no’ vote for austerity triggers a thousand reactions

New Delhi: Greeks on Sunday responded with a resounding “no" to demands for more of the excoriating austerity that over five long years has been the price of keeping Europe’s weakest economy afloat.

In a referendum seen as the single biggest experiment in people power since the debt-stricken country crashed on the rocks of bankruptcy, 61% of voters rejected the terms of further financial assistance set by creditors at the European Union and International Monetary Fund (IMF).

Greece’s risky electoral confrontation with its creditors exploded into a cathartic street party in Athens late on Sunday, as a nation that has been pushed to the brink of economic despair rejoiced at its resolve to not blink in a high-stakes stare down with Europe.

Such rhetoric has done little to endear Athens to the mainly German and French politicians it will now have to persuade to save the country’s economy. Germany’s vice-chancellor, Sigmar Gabriel, warned that Greece was heading for “bitter abandonment and hopelessness" following the vote.

While the ‘no’ vote is a major victory for Greek prime minister Alexis Tsipras, he clarified it doesn’t mean an end to negotiations. “I’m fully aware the mandate you gave me is not one of a rupture with Europe but a mandate to strengthen our negotiating position to seek a viable solution," he was quoted as saying in a Reuters report. Greece’s deputy finance minister Dimitris Mardas seconded this, saying, “With the referendum results today, we have a message of ‘yes’ to Europe, ‘yes’ to the euro but ‘no’ to the terms of the creditors’ proposal."

The vote, however, has delivered a blow to German chancellor Angela Merkel. The resounding “no" vote in Greece on Sunday presents her with her toughest challenge since the euro zone crisis broke out five years ago. Her choice is now between yielding to Tsipras and sweetening the bailout terms for his country, or sticking to her hard line—and her own voters’ sentiment—in refusing any further concession.

The media is blaming it on Merkel for letting the situation slip out of hands. “…she hasn’t learned how to use her power, instead allowing a bad situation to heat up to the boiling point. Her inability to take unpopular stances badly exacerbated the Greek crisis," said a report on Merkel’s talks with Tsipras over the last few weeks.

Merkel had a lot riding on this vote. Over the past several months, the German government has ceaselessly stressed the fact that it would not be Germany, but rather the institutions of the IMF, the European Central Bank (ECB) and the European Commission that would decide whether Athens’ reform pledges would be enough to secure new loans. Yet, no one really bought Merkel’s promise to turn things completely over to the institutions, especially not in Athens. Quite the contrary. The concept of making financial support contingent upon tough reforms has been seen as a German approach from the beginning.

Most importantly, while a ‘no’ vote presents a political dilemma for the EU’s two largest economies—and Greek creditors—it could be a personal disaster for German chancellor Angela Merkel, who is scheduled to hold crisis talks with French president François Hollande.

Earlier, they discussed the outcome of Greece’s referendum in a telephone call, with both agreeing the ‘no’ vote must be respected, a German government spokesman said. “Both were in agreement that the vote by the Greek people be respected. The chancellor and the President are in favour of calling for a summit of eurozone heads of state and government heads on Tuesday," the spokesman said.

Overall, this could mean that it’s time for European leaders to do a rethink. They must come up with reforms to fix a rickety single currency from its foundations, according to The Guardian. In time, that will mean underpinning monetary integration with broader sovereignty-sharing. More immediately, it means having the honesty to admit that the full Greek debts will not be repaid, and being ready to negotiate towards something more realistic.

The decision for European leaders isn’t whether they like or dislike Tsipras and his finance minister, Yanis Varoufakis. It is whether they believe the goals of maintaining a united Europe are worth yielding to Greece’s demands: maintaining a spigot of cash (through ECB bank lending programmes) and ultimately a new bailout that lets the Greeks write down meaningful debt and relax some of the cuts to pensions and government worker pay of past deals.

Also, what many European policymakers know—even if few articulate it—is that the Greece crisis is about more than just money. For example, Europe will be increasingly vulnerable to Russian aggression if its links to Greece are substantially loosened.

So what went wrong with the ‘yes’ campaign? Columnist Wolfgang Münchau says the ‘yes’ campaign failed primarily because of three reasons. First and the biggest, the clearly concerted intervention by several senior EU politicians, threats that were seen as an attempt to interfere in the democratic process of Greece. Second was a failure to explain how the bailout programme could work economically and the third was the arrogance on the part of ‘yes’ voters.

What happens next?

Now is the time for some serious discussions that go beyond political posturing and tactical games. It is now crucial that both sides put this behind them and recognize the importance of what is at stake for both Greece and Europe.

Even before the polls closed in Greece, Emmanuel Macron, the French economic minister, insisted that even with a ‘no’ vote in Sunday night’s referendum, talks must resume between the leftwing government in Athens and its euro zone creditors.

But there are few elsewhere in the euro zone who predicted a resounding ‘no’ would lead to much more than continued stalemate and would mean a slow march to Greece exiting the euro zone. “Greece has just signed its own suicide note," predicted Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy.

There are, though, a number of ways events could play out. Almost every European leader of note sought last week to put the frighteners on the Greek people, warning them that a victory for “no" meant leaving the single currency. Angela Merkel, François Hollande, Matteo Renzi and the rest now have to put up or shut up.

More than likely they will shut up, at least for now. Emergency assistance for Greece will continue, while the troika of the European commission, the ECB and the IMF sees how events in Greece unfold.

Here are some likely scenarios now that Greece has voted ‘No’ on the debt deal.

The questions on top of your mind right now could be: Will the euro zone collapse? Will Greece print drachmas?

At the crux of the matter, however, is the fact that unless something changes in the next few days, Greece is going to default on roughly €490 billion of debt in one form or another. Even though much of it is owed to governments, it is still real money that will trigger real losses.

For investors, however, there may be buying opportunities if, of course, they don’t panic. An optimistic view on how this could not be all that bad for Greece says, “It is far more likely to recover over the next 12 months than to get any worse—especially if it leaves the euro."

If you are completely out of touch, here are seven things you can look out for to know what is happening in Greece and what could happen next.

If Grexit really happens, have you ever wondered what Europe would look like. To start with, the euro zone would lose only 1.8% of its economic output, while GDP per capita would actually rise 1.5%. Read more.

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