The Greeks have spoken. Asked whether they wanted to accept Europe’s bailout proposals and continuing austerity, their response was a big fat ‘oxi', or no. A surprising 61.3% voted against the bailout in Sunday’s referendum, which pollsters had expected to go down to the wire. Anyone would think they only had a week to prepare or something.
‘The mandate you’ve given me does not call for a break with Europe, but rather gives me greater negotiating strength,’ said PM Alexis Tsipras, who presumably will be hitting the phones today in search of a new, more favourable deal on Greece’s crushing debt.
He’ll need one. Greece’s banking system, comatose for a week since the European Central Bank (ECB) refused to raise its emergency liquidity assistance, will die in days unless it gets an injection of cash.
But the ECB, a bureaucratic body whose boss Mario Draghi really doesn’t want to be the man who decides the fate of the Eurozone, is likely to do so only if the politicians are willing to make a deal. So, despite what European leaders are saying, the ball is firmly in their court.
Germany’s Angela Merkel et al know that the referendum has tied Tsipras’ hands, which is probably exactly what he wanted. He cannot possibly accept bailout terms similar to those his people just rejected. Any such proposal will be a slap in their collective faces.
As a result, any deal reached will have to be much more favourable to Greece, or there won’t be a deal at all. Tsipras has already called for a sizeable third bailout, and said debt restructuring would be on the table, following an IMF report that effectively backed his position that it was unsustainably high. Nice to see Christine Lagarde et al don’t hold a grudge over that whole default thing, eh?
Tsipras may be willing to offer some concessions – he gave finance chief Yanis Varoufakis the boot in a sign that he really wants to do business with the Eurogroup – but he will clearly be after much more than Europe had previously offered.
The choice facing European leaders is all but impossible. If they refuse to give ground, even now, then they face the utter collapse of the Greek economy, almost certainly its exit from the Euro, the likely loss of hundreds of billions in unpaid debt and huge political damage to the European project. If they agree, they risk being pilloried by their own electorates, who loathe waste and weakness.
The choice appears to have deepened splits within the Eurozone between doves and hawks.
French economy minister Emmanuel Macron said ‘it will be our responsibility not to create the Treaty of Versailles of the Eurozone’. Anyone who remembers their history lessons will note that the harsh treaty ending the First World War didn’t work out too well...
Dutch finance minister and president of the Eurogroup Jeroem Dijsselbloem, on the other hand, said the decision was ‘very regrettable for the future of Greece’, while Germany’s deputy chancellor Sigmar Gabriel said the country was going down a path of ‘bitter abandonment and hopelessness’.
More ominously still, Merkel's spokesman Steffen Seibert said 'the preconditions for entering into negotiations over a new aid programme do not currently exist'.
Perhaps the biggest problem for Tsipras – if he really wants a deal, of course – is that European leaders effectively need to reach unanimous agreement. Given the time-scale and lingering opposition in some quarters, that doesn’t seem too likely.
If Greece is to stay in the Euro, there will need to be some kind of compromise that both sides can sell to their own people as a win. Given this is precisely what they’ve failed to do for the last few months, it’s hard to find much hope for that.