For the second time in six months, the Greek public has voted against the austerity policies that were imposed on the country as a result of the international bailouts that took place in 2010 and 2012. In elections held in January, Syriza, the left-wing alliance that promised relief from spending cuts and a recession, won thirty-six per cent of the vote and emerged as the largest party in the Greek parliament. On Sunday, the vote against austerity was even more decisive: in a referendum on whether Greece should accept a recent offer from its creditors, sixty-one per cent of Greeks said, “Oxi”—“No.”
The result defied the opinion polls, which had suggested a tight vote, and it was quite overwhelming. Late Sunday night, it appeared that every single electoral district had followed the advice of Prime Minister Alexis Tsipras and voted “No.” As the numbers came in, Antonis Samaras, the head of the main opposition party, New Democracy, who had urged Greeks to vote “Yes,” resigned. A jubilant Tsipras hailed the results, saying that Greeks had acted bravely and proved democracy cannot be blackmailed. However, Tsipras also stressed that this wasn’t a mandate for rupture with Europe, but rather a vote to strengthen Greece’s negotiating position within the eurozone.
To his credit, Tsipras had all along described the referendum as a bargaining tool. The efforts by other European leaders to turn the vote into a referendum on Greece’s continued membership in the eurozone backfired horribly, apparently persuading many Greeks that their plucky little country’s mighty neighbors were seeking to bully it into submission. But the vote wasn’t just a nationalistic gesture. Having lived through their own version of the Great Depression, most Greeks really have had enough of austerity policies, and they are demanding an alternative.
Whether they will be offered one within the eurozone remains to be seen. Although the result was a great political triumph for Tsipras and Syriza, it doesn’t automatically translate into a victory in the showdown with the European Union and the International Monetary Fund. Greece is still broke, and its banks are still closed. If the Europeans want to force the Greeks out of their currency club, they have the means to do it at any moment. All they have to do is turn off the credit that the European Central Bank has been providing to Greece’s banks. Indeed, the E.C.B.’s governing council will decide on Monday what to do next.
With Angela Merkel, the German Chancellor, and François Hollande, the French President, due to meet in Paris on Monday afternoon, and an emergency summit of all European Union leaders scheduled for Tuesday, it seems highly unlikely that the E.C.B. will render these deliberations pointless by immediately torpedoing the Greek financial system. In all likelihood, there will be at least one more round of talks between the two sides, and, quite possibly, more than one. Greece’s next big payment to its creditors isn’t due until July 23rd, which is more than two weeks away. If the country’s banks can somehow be propped up until then, there is time for more deliberation.
And, as I’ve pointed out before, the elements of a possible deal aren’t hard to draw up on paper. On the taxation and spending side, the proposal that Syriza offered a couple of weeks ago went a good deal of the way toward meeting the creditors’ demands. To be sure, it was a long time coming, and some of its revenue-raising measures, which would have increased taxes on businesses and wealthy people, weren’t to the liking of the Troika. But the over-all budget targets were close to what the E.U. had demanded. With some goodwill and flexibility on both sides, the differences on how to achieve them could be narrowed. The same is true of the creditors’ demand for structural reforms, some of which Syriza has embraced and some of which the Party has resisted.
At this stage, the bigger sticking point is debt relief. Almost all objective analysts reckon that it is necessary. Even the I.M.F. now agrees. Yanis Varoufakis, Greece’s finance minister, says he won’t sign a deal that doesn’t address it. But will the big European countries, especially Germany, even consider it? Or will they continue to insist that Greece has to reach an agreement on everything else first, and that only then can the discussion turn to debt? If they stick with this line, it is hard to see how a compromise can be reached.
As of early Monday, European time, the signals were mixed. In Brussels, the European Commission issued a statement saying that it “takes note of and respects the result of the referendum in Greece.” Elsewhere in Europe, though, the reaction to the vote was less accommodating. Sigmar Gabriel, Germany’s economic-affairs minister, said that negotiations over a new deal for the Greeks were “barely conceivable,” adding, “Tsipras and his government are leading the Greek people on a path of bitter abandonment and hopelessness.” Peter Kažimír, the finance minister of Slovakia, said on Twitter, “The nightmare of ‘euro-architects’ that a country could leave the club seems like a realistic scenario,” before adding in a separate tweet “Rejection of reforms by #Greece cannot mean that they will get the money easier.”
In the financial markets, which seemed headed for a rocky opening Monday, analysts were busy parsing the odds of a Grexit. The British bank Barclays, for instance, issued a research note that said, “EMU exit now is the most likely scenario.” On the streets of Athens, however, where revelers celebrated the result of the referendum late into the night, Matina Stevis, a reporter for the Wall Street Journal, encountered a more hopeful attitude among Greeks, and tweeted, “What I’m getting from people who voted ‘no’ is that they overwhelmingly believe Tsipras & his promise of a new negotiation starting tomorrow.”
In the coming days, we will find out if this optimism is justified, but one thing is clear. The Greek people have spoken—again.
