What did they mean by that? Did Greece’s No voters truly think the creditor nations were bluffing when they said No meant goodbye to the country’s membership of the single currency? Or did the majority of voters who marked Oxi on their ballot papers in cities and villages across Greece really want out of the eurozone? We can’t be sure. That’s the problem with referendums. Plebiscites are presented as the apotheosis of democracy – but they often leave as many questions as answers.
But the question of what the Greek people meant is today of secondary importance. The critical question now is: what do the country’s creditors do? If we are to believe the hard rhetoric that has emanated from the capitals of Germany, Italy, Spain and the Netherlands over the past week the process for ejecting Greece from the single currency will shortly begin.
That would very likely start with a decision from the European Central Bank to tighten – or even cut off – the access of Greek banks to the emergency lending lifeline that has kept them solvent in recent months. Without that liquidity lifeline the big four Greek banks that look after the savings of the majority of the population will need to be nationalised and recapitalised with a new de facto alternative currency. Some savers may well see a large bite taken out of their deposits in the process.
The Greek Finance Minister, Yanis Varoufakis, has said that there is no way for the eurozone to force Greece out of the single currency against its will. That’s true enough. No one can stop Greece using the euro – just as America can’t stop small Caribbean countries pricing goods in dollars.
But if Greece’s banks can’t borrow from the Frankfurt-based European Central Bank the supply of those euros in Greece will very soon dry up. If the Syriza-led government is to continue paying public sector workers it would need to establish an alternative means of payment. Call it a Greek government “IOU” or call it a new drachma – the effect is the same: Greece is no longer really in the eurozone.
In the end that may be good for Greece. Its stunted exports industry would become more competitive if it introduced a new currency that is weaker than the euro. Its large tourism sector would get a shot in the arm from the devaluation.
But in the immediate term it would be a nightmare for Greece. The currency transition would take time. In the meantime imports of medicines, fuel and even food would dwindle. Businesses – unable to pay their euro-denominated debts – would default. Unemployment would soar and the country’s economy would enter a new depression.
But maybe the ECB will stay its hand for a while. Cutting the throat of Greek banks would be a decision with extraordinarily significant geo-political ramifications. The European Central Bank board, led by Mario Draghi, is nominally independent. But independence has its limits when a currency zone’s very existence is at stake. Mr Draghi will want to have the tacit nod of approval from the governments of the eurozone before taking such a step. This is Greece’s chink of light.
The French Economy Minister, Emmanuel Macron, has contradicted his German and Dutch colleagues, by saying that Oxi does not mean talks with Greece stop. Could there still, even now, be a high-level compromise involving the two giants of Paris and Berlin that saves tiny Athens? Has Greece jumped over the cliff with a French safety rope attached to its waist? Perhaps there was some bluff in the creditors’ tough talk after all. We shall very soon find out. But make no mistake: Greece has taken an almighty and terrifying leap into the unknown.
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