Polls on Friday showed the Greeks almost evenly split on a referendum that is seen in the rest of the European Union as a test of the Balkan nation’s commitment to the euro currency.
A Bloomberg poll showed 43 percent inclined to vote “no” in Sunday’s referendum and 42.5 percent in favor. An Alco poll published in the Ethnos newspaper similarly showed the Greeks divided: 40 percent said they would vote “no” against 41.5 percent who said they would vote “yes”.
Greece’s far-left government insists the referendum is not a vote on the euro but other members of the single-currency union disagree.
The Netherlands’ Jeroen Dijsselbloem, who chairs the meetings of eurozone finance ministers, told the Dutch parliament that in case of a “no” vote, “There is not only no basis for a new program; there is also no basis for Greece in the eurozone.”
French president François Hollande, German vice-chancellor Sigmar Gabriel, Italian prime minister Matteo Renzo and Jean-Claude Juncker, the president of the European Commission, have said much the same thing this week.
Yet Prime Minister Alexis Tsipras, who scuttled his country’s negotiations for an extension of a €240 billion program by unexpectedly calling the referendum last Saturday, told Greeks not to worry “because we will have a deal 48 hours after the referendum.”
Either with an agreement which will not be sustainable if people vote “yes” or, if people vote “no,” on Monday I will be in Brussels to sign a deal.
Yanis Varoufakis, his finance minister, was also optimistic, telling the BBC there was a “100 percent chance of success” in talks for another bailout, whatever the outcome of the referendum.
He previously insisted there was no way Greece could be made to leave the eurozone. Although Varoufakis also vowed there would be no capital controls a day before they were imposed, limiting Greek bank withdrawals to €120 per day.
The next day, Dijsselbloem told reporters in The Hague that Varoufakis’ comments were pulled out of thin air.
To put Greece back on the right track and get its economy going again, difficult measures need to be taken. Any politician who says that wouldn’t be necessary in case of a “no” vote is fooling his people.
Greece’s creditors demanded budget cuts and liberal economic reforms in return for financial aid. Tsipras’ far-left Syriza party, which won the election in January on vows to end austerity, wanted to raise taxes instead and roll back privatizations and labor market reforms that were designed to make the country more competitive and prevent another debt crisis in the future.
Among the main sticking points for an extension of the bailout that expired on Tuesday were Greek proposals for a one-off 12 percent tax on corporate profits and its refusal to enact comprehensive reform of a pension system that is relatively the most expensive in the eurozone.
Without the extension, Greece was unable to pay off a €1.5 billion loan from the International Monetary Fund.
Although neither the IMF nor rating agencies considered Greece’s nonpayment an actual default, the country doesn’t have the money either to make good on €3.5 billion in bond redemptions that are due in the middle of July. If Greece fails to make that payment as well, the European Central Bank — which has so far spent €89 billion to keep the Greek banks afloat — would probably have to cut off funding and drive the country into bankruptcy.
Sunday’s referendum asks voters if they approve or disapprove of the creditors’ latest offer for a bailout extension — a question that is technically irrelevant because the offer is no longer on the table.
Tsipras and Varoufakis may hope that a “no” vote will strengthen their negotiating position in Brussels and give them a fresh mandate to demand a watering down of austerity measures and relief from Greece’s gargantuan debt, now equal to 177 percent of yearly economic output.
But it would be unfeasible for other European politicians to give in to Greece at this point. More likely, a “no” vote would cut off Greece’s ECB funding, trigger a financial meltdown and culminate in Greece’s ejection from the eurozone.
A “yes” vote, on the other hand, would likely force Tsipras and his Syriza-led coalition to step down in favor a government of national unity. It could then restart negotiations for financial support in order to meet the ECB deadline.
Relieved to be rid of a government that constantly tested their patience, European leaders may then be willing to throw Greece another lifeline, provided it recommitted to reforms — if possibly on an extended timetable.