EU leaders will have a lot of soul searching to do today, following the victory by the “No” camp in the Greek referendum on Sunday (5 July), which rejected their proposed rescue package.
A eurozone summit on Tuesday (7 July) will look into the fallout of the vote.
In Athens, thousands of jubilant Greeks waving flags and lighting fireworks poured into the city’s Syntagma Square, as official figures showed 61% of Greek voters had rejected a deal the two sides had been close to reaching on 26 June.
You made a very brave choice,” Prime Minister Alexis Tsipras said in a televised address. “The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution.”
Our immediate priority is to restore our banking system's functioning & economic stability. #Greece
— Alexis Tsipras (@tsipras_eu) July 5, 2015
During his campaign, Tsipras had been saying that a “No” vote would strengthen the Greek negotiating position and that he would go to Brussels the day after the referendum and sign a good deal for the country.
However, international creditors say that their offers are no longer on the table and that Greece, whose economic situation has further deteriorated, would have to negotiate a new arrangement from scratch.
Greek banks remain closed and the available liquidity is barely enough to suffice for a few days. Greeks can withdraw a maximum of €60 a day from ATMs.
The vote leaves Athens in uncharted waters, risking a banking collapse that could force it out of the eurozone.
The 60-40 margin of defeat for the terms of a cash-for-reform deal, which the leftist Greek government rejected a week ago, shocked EU officials, who had been heartened by opinion polls showing the “Yes” camp gaining ground as bank closures and the rationing of cash withdrawals began to bite.
German Chancellor Angela Merkel and French President François Hollande agreed in a phone conversation “that the Greek vote has to be respected”.
According to a German government spokesman, both politicians spoke in favour of a special eurozone summit on Tuesday (7 July). Council President Donald Tusk, who was tasked with convening the summit, tweeted a couple of hours later that it would start at 6PM CET on Tuesday.
— Donald Tusk (@eucopresident) July 5, 2015
Merkel will travel to Paris this evening to confer with Hollande on the consequences of the referendum.
The “No” vote is a personal blow for European Commission President Jean-Claude Juncker, one of the architects of the euro, who worked for months to try to broker a debt deal with Tsipras despite misgivings in Berlin, and who called on the Greeks to vote “Yes”.
The European Commission said in a brief statement that it “takes note of and respects” the referendum result.
There was a thunderous silence from top EU policymakers in Brussels and Frankfurt, who conferred by telephone but avoided public appearances to comment on an outcome, which was a stunning setback for EU governments but delighted eurosceptics, as well as the pro-European left, who want a more social union.
Martin Schulz, the European Parliament President, expressed his pessimism regarding Greece’s future and warned of a humanitarian crisis in the country.
“This is a difficult day: there’s a broad majority in Greece, and the promise of Prime Minister Tsipras to the Greek people that with the “No” vote, the position of Greece for negotiating a better deal would become better is, in my eyes, not true…” he said, adding that the EU should start preparing a humanitarian aid programme for Greece.
Should Greece stay?
Hours before the referendum result became known, Schulz said that a “No” vote victory would mean that Greece would have to abandon the euro and introduce another currency.
Jeroen Dijsselbloem, chairman of the Eurogroup of finance ministers of the currency bloc, said in a letter to his Dutch Labour Party members before the vote: “Although the government in Athens would like people to think otherwise, it is about the question of whether Greece stays in the eurozone or not.”
After the referendum, Dijsselbloem issued a statement in which he called the referendum result “very regrettable for the future of Greece”. “For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July,” Dijsselbloem wrote.
But the most devastating reaction came from the German Vice Chancellor and SPD leader Sigmar Gabriel.
Speaking to Berlin’s Tagesspiegel newspaper, Gabriel said negotiations about a new bailout program are “hardly imaginable“ after Greek’s overwhelming referendum “No” at the referendum.
According to Gabriel, Tsipras had persuaded his people that a “No” would strengthen Greece’s bargaining position. But in fact, Greece’s Prime Minister had “torn down (the) last bridges” over which Europe and Greece could have moved towards a compromise, Gabriel said.
Manfred Weber, the leader of the centre-right European People’s Party tweeted that his political force would stay with the Greek people “whether inside or outside” the eurozone.
— Manfred Weber (@ManfredWeber) July 5, 2015
In a sign that the Syriza-led government might change its negotiating tactics with the creditors, Greece’s firebrand finance minister Yanis Varoufakis resigned this morning.
In a statement, Varoufakis said he had been “made aware” that some members of the eurozone considered him unwelcome at meetings of finance ministers, “an idea the prime minister judged to be potentially helpful to him in reaching an agreement”.
“For this reason I am leaving the ministry of finance today.”
Just ahead of the referendum, Varoufakis had called the creditors “terrorists”, saying they were trying to intimidate voters by capping the amount Greek banks can borrow, which has led to desperate queues for cash.
“What they’re doing with Greece has a name: terrorism. If Greece crashes, a trillion euros – equivalent to Spain’s GDP – will be lost,” he said.
Varoufakis may have failed in his doomsday prediction, which allowed him so far to taunt the creditors. Markets however have reacted so far quite calmly to the Greek referendum.
Poland’s Finance Minister Mateusz Szczurek said today that he was not surprised by the result of the Greek referendum, and that the first reaction of the financial markets does not seem significant.
He added that the EU’s inability to deal with the Greek crisis is an argument for Poland not to enter the eurozone for now.