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Greece referendum: What after the ‘No’?

Theoretically, the EU could recapitalise Greece’s banks, but doing so would mean accessing the Eurozone’s permanent bailout fund, the European Stability Mechanism (ESM).

By: Express News Service | New Delhi |
Updated: July 7, 2015 9:06:58 am
Greece, Greek euro crisis, Greece bailout, Greek Bailout, Greece eurozone exit, Greek creditors, Greece bailout talks, Greek referendum, Greece referendum, Greece euro crisis, Greek PM, latest news, top stories, indian express Greece’s Prime Minister Alexis Tsipras, right, casts his vote at a polling station in Athens. (Source: InTime News via AP)

What is the latest in the Greek crisis?

Greek Prime Minister Alexis Tsipras is headed to Brussels for an emergency meeting with European leaders on Tuesday. Despite what many see as his reckless brinkmanship, he has the support of the full political spectrum in his country, barring the far left and the far right — an indication of a closing of ranks in Greece in case a deal doesn’t ultimately happen. He spoke to Chancellor Angela Merkel of Germany by telephone during the day, and reportedly promised a “comprehensive” new proposal — however, Sigmar Gabriel, Merkel’s deputy and Germany’s economic minister, warned that a third bailout, even if won by Athens, would involve conditions even tougher than the earlier deal that Tsipras and the Greeks rejected, precipitating the current crisis in the first place.

READ: What Greece’s currency will see in the event of it having to leave the Eurozone — a situation that India has faced twice in its history 

What straws in the wind were visible?

The outlook turned steadily glum through the day after some promise was initially seen in Tsipras’s sacrifice of his Finance Minister Yanis Varoufakis in a concession to Greece’s creditors. Besides Gabriel, Christian Noyer, member of the governing council of the European Central Bank (ECB), which holds the key to whether — and for how long — Greek banks stay afloat, said that Greece’s debt to the ECB is, “by nature, impossible to restructure because that would be monetary financing”. For the conciliatory tone adopted by Economy Ministers of France and Spain, Austria took a much harder line. And there was nothing immediately to suggest that Merkel would be keen to go against public opinion in Germany to bail out Greece.

What is happening with Greece’s banks?

They remained shut on Monday, and some bankers were telling wire services that they would remain shut for some more days. They are believed to be down to their last € 500 million in cash, which, for Greece’s 11 million people, works out to a terrifying € 45 — or Rs 3,150 — per person. Many ATMs had lowered the daily disbursal ceiling below the government’s mandated € 60 per person. Unless Greece gets cash urgently, its banks will collapse — giving rise to an unpredictable and potentially catastrophic situation. There will be no salaries or pensions, power, public transport and healthcare will stop, and there will be no imports.

So is Greece now firmly on the path to Grexit, an exit from the Eurozone?

Tuesday’s meetings will be crucial. Failure of negotiatons will make Greece’s exit from the Euro inevitable. Theoretically, the EU could recapitalise Greece’s banks, but doing so would mean accessing the Eurozone’s permanent bailout fund, the European Stability Mechanism (ESM). This seems unlikely, and will probably be too painful for Tsipras to accept, especially after the referendum he called and urged a ‘No’ vote for. European leaders will also be mindful of political spinoffs of what might look like buckling under Greece’s referendum dare, in which an overwhelming 61.31 per cent voted to back their government’s rejection of European bailout conditions. Two interesting developments on Monday were a phonecall by Tsipras to Vladimir Putin, during which the Russian leader “expressed support for the Greek people”, and a short statement issued by IMF chief Christine Lagarde saying the Fund “stood ready to assist Greece”.

How did the markets react to the referendum?

European markets fell, but not dramatically. Most Asian markets fell somewhat; the Sensex was up 116 points. US stocks were falling, but not by much. There seemed no immediate panic.


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