With the votes counted, more than 60% of Greeks have said no to the bailout terms set by the country’s international creditors. Following this resounding rejection, prime minister Alexis Tsipras now has a clear mandate from the Greek people to renegotiate the terms and conditions of the agreement with the IMF and its EU partners.
The referendum presented Greek citizens with a dilemma. On one hand, voting Yes would mean conceding to further austerity and siding with precisely those political forces that are perceived responsible for Greece’s predicament. On the other, voting No would bring a new period of uncertainty for the country.
The precise wording of the referendum question contributed to this quandary. The government was very careful not to ask voters if they wanted to stay in the eurozone or not, which is – after all – what is at stake. Rather, Tsipras decided to ask a very specific question on a technical issue that he himself had rejected.
This was a political move. Given that public opinion is generally supportive of eurozone membership, it was much more likely that Greeks would vote to reject austerity than oppose eurozone membership. This essentially allowed the government to use this referendum as a popular vote of confidence for its negotiation policy with Greece’s creditors.
The economic consequences of this result could be devastating. Greece’s domestic economic situation will be weakened and further economic uncertainty will follow. It is not clear when banks will re-open and whether the country will be able to address its liquidity problems. Deputy finance minister Nadia Valavani has already warned that Greeks will not be permitted to withdraw cash from safety deposit boxes for the time being.
It is also unclear how the government will bring investment and growth to the country. Any foreign business is unlikely to invest in a country which could nationalise their assets at any moment.
And, crucially, we still don’t know how this result will affect Greece’s negotiating position with the EU partners and the IMF. It may well weaken rather than strengthen it, as many voters may have hoped.
The Greek government has lost credibility abroad. Its EU partners and the IMF no longer trust it and the view from abroad has been that this is nothing short of a vote on Greece’s eurozone membership. In fact some key players, such as European Parliament president Martin Schulz, have even argued that if Greece votes no, it should start looking at introducing a new currency.
The morning after
As his country went to the polls, Tsipras said: “Today we celebrate democracy,” and proclaimed that the will of the people should not be ignored.
But the referendum has had the opposite effect. It has further weakened Greek democracy and undermined Greece’s negotiation position with its creditors. What’s more, its has solidified divisions in Greek society. In a country with a history of civil war and dictatorship, this polarisation may lead to a further rise of the extremes.
The day after the referendum is a very important moment. The people have spoken and the government will need to finally clarify its vision for the future. It will need to explain if it is resolved to addressing Greece’s crisis within the eurozone by cooperating with its partners or if it wants to create a utopian socialist state in Europe. This result marks a new period of uncertainty, not only for Greece but for Europe – and potentially for the world economy as a whole.