Greece has spoken. More importantly, it has done so emphatically and in direct opposition to EU wishes. The No campaign won the 5th July referendum with over 60 per cent of the vote. Greeks partied in the streets. Its governing party Syriza no doubt partied too, though behind closed doors. Syriza had taken a huge gamble and won. Greek Prime Minister Alexis Tsipras was subdued but clearly pleased when he addressed the nation late on Sunday evening. He would, he said, return to the negotiating table.
The question is: what happens now? The majority of Greeks may be celebrating but their country’s creditors are not. European parliament President Martin Schulz in particular made his anger at the No vote—which he said had put Greece at loggerheads with every single member of the Eurozone—clear. It was, he said, now “up to the Greek government to make proposals that would convince the eurozone and the institutions in Brussels that it is necessary, possible, and even effective, to renegotiate.”
Indeed. Tsipras may have won the battle of Greece’s referendum but he only called it because he was losing the war with Greece’s lenders. They insist on austerity; he promised his people to fight it. He may now have popular support for change, but whether he will get it is another story entirely. “I am pessimistic,” says Stathis Kalyvas, a professor of political science at Yale University. “There are several problems. The first is that the deadlines [to reach a deal] are very narrow right now. Coming to an agreement is a very complicated process; people just don’t understand just how complex the legal and technical details involved are.”
“The second,” he continues, “Is that there is now a lot of mistrust between the two sides and it will not easy to get over it. [German Chancellor] Angela Merkel has a number of attributes and one of them is that you never cross her. Tspiras just did.”
“The third is Tsipras himself,” he concludes. “He's very strategic, but also myopic, in the sense that he can plan all his moves well, but miss the big picture. He has learned in his political career that every time he is faced with a challenge, the solution is doubling down rather than compromising. He has done the same now. His biggest move may be his last.”
This could be a major problem. Because while the creditors have expressed their openness to talks they have been equally clear on the need for reforms that Tsipras has so far been unwilling to make. It’s a stalemate. “Given this,” Kalyvas adds, “Tsipras may think he is better taking Greece out of Europe, which will enable him to govern without interference. But the consequences would be catastrophic.”
The next two weeks will be critical for Tsipras and for Greece. Today he will address a summit of Eurozone leaders. He has, he claims, a new package of proposals. But he just saw his country reject austerity by over 60 per cent so it remains difficult to see how he can compromise any further without being accused of selling out his own people. In this sense, the referendum has trapped him even further.
Read more on Greece:
How Greece became Europe’s fault line
It’s in Britain’s interests for Greece to stay in the eurozone
Varoufakis was offered up as a token sacrifice
July is a month of deadlines. On 20th July Greece has to pay €3.4bn to the European Central Bank (ECB). It already missed a payment to the IMF on 30th June, but that default is surmountable—the debt to the ECB less so. Greek banks are closed as the government has introduced capital controls to the country. The Greek government has long relied on the ECB to provide liquidity to its banks—failing to pay the loan instalment on 20th July would be a sovereign default meaning that Greek banks would be ruled insolvent and possibly barred from receiving further liquidity, or financial assistance. The country’s entire banking system could collapse. Grexit would almost certainly follow.
And even before Greece has to face possible financial apocalypse, it has an earlier, potentially explosive deadline to meet. According to Kalyvas, 12th July is when the latest public sector salaries are due. Right now, it’s hard to see how these payments can be met. If the government pay in IOUs, Greeks will take to the streets once more, but this time with fury.
If this happens Tsipras may have no choice but to double down a final time—rallying his people to Syntagma Square outside the Greek parliament to tell them that once again Greece is being blackmailed, and that once again he will not stand for it. And thus would Tspiras lead Greece out of the Eurozone in a blaze of glory. But glory, alas, is often short-lived. Financial suffering, on the other hand, can continue for generations.
