The Greek Referendum

The No camp decisively won Sunday’s referendum in Greece over the terms of its debt bailout, a vote which creditors deemed an in-out choice on euro membership. Results published by Greece’s interior ministry showed that about 61% of ballots polled voted ‘No’ against approximately 39% ’Yes’ votes. A breakdown of the results by region in Athens showed astonishing class differences in voting. In poorer areas of Athens (Aspropyrgos, Perama, Keratsini etc) more than 70% voted 'No' while in rich areas (such as Ekali) 85% voted 'Yes'! 

Although prime minister Alexi Tsipras reiterated that a win for No camp – technically a rejection of creditors’ bailout offer – would strengthen his hand in renewed bailout talks, experts think otherwise. According to them this would plunge Greece deeper into turmoil as it tries to prevent the collapse of a financial system that is rapidly running out of cash, “This could mark the point of no return. Greece and the euro have now entered totally uncharted waters,” said an analyst. The president of the European parliament, Martin Schulz, too had said ahead of the Sunday vote that, “If they say No, they will have to introduce another currency after the referendum because the euro is not available as a means of

payment.”

Liquidity crunch continues but banks expected to open on Tuesday

According to the reports, the Greek central bank governor, Yannis Stournaras, called the European Central Bank (ECB) president Mario Draghi on Sunday evening to request for more emergency loans. With banks fast running out of cash, the Greek central bank also called in a meeting to discuss the liquidity crisis and whether to reduce the daily withdrawal limit from €60 to €20. On the other hand, members of the Syriza government reassured voters that banks would reopen by Tuesday regardless of the outcome of the referendum. The ECB governing council is scheduled to hold a conference call today to decide on more support for Greece’s financial system and it may also choose to step up purchases of Eurozone government bonds if events in Greece drive up yields of other indebted countries like Italy, Portugal and Spain. 

Investors nervous because of unknown political and/or economic contagion

As rallies in support of Greece were held in several European capitals, experts feared of political contagion, if not economic. Enrico Letta, Italy’s former prime minister said that the Greek crisis could potentially pave a motorway for the affirmation of populism in Italy. Likewise, Spain’s economy minister Luis de Guindos reiterated that Greece should remain part of the Eurozone as the membership is irreversible while also adding that his government was open to negotiating a third bailout with the creditors. 

Economists also warned that a stalled negotiations process could have detrimental impact on financial markets in Europe, especially against a background of growing problems in China. The top securities brokerages in China have announced that they will buy at least 120 billion yuan of shares in an effort to stabilize the market which has slumped by almost 30% since the middle of last month. This announcement follows a slew of policy actions undertaken by the Chinese central bank last week including a cut in the interest rate. But none of the initiatives has so far succeeded in halting the slide.

Leader to hold talks on future strategy

Meanwhile conciliatory voices have started to make some noise again. Emmanuel Macron, French economy minister, said that talks needed to resume between Greece and its creditors. French president Francois Hollande and German chancellor Angela Merkel will hold talks in Paris today evening to discuss the future strategy amid Mr Tsipras announcing that he will move towards rapprochement. In another development, while a spokesman for Eurogroup chairman Jeroen Dijsselbloem said that the group of Eurozone finance ministers will meet later this week, France and Germany are pushing for an urgent summit on Tuesday and are likely to discuss a new Greece bailout proposal. 

The biggest sign that all parties might head back to the negotiating table is the blinking of Germany’s finance minister Wolfgang Schäuble, one of the most hawkish and prominent leader, along with the resignation of Greek finance minister Yanis Varoufakis. The embattled Greek finance minister resigned after lenders apparently expressed preference for his absence from the Eurogroup meet on Tuesday.  He resigned saying the move could potentially help prime minister Tsipras reach an agreement with creditors, in a clear sign that both sides are willing to cede some space now. 

On the other hand, Mr Schäuble, who was until now a hardliner, suddenly turned a more conciliatory face towards the Greek people. With pharmacists in Athens reporting that the government had rationed the distribution of drugs, and fears being raised of food shortages within weeks, the finance minister of Europe’s biggest economy said that they would not leave the Greek people in the lurch. But the Greek prime minister and finance minister continue to keep up the pressure with former scheduling a call with Russian president Vladimir Putin on later today and the latter  by accusing European leaders of scaremongering and spreading fear in Greece people.