The resounding anti-austerity vote by Greek voters is not surprising. Greece has undergone the equivalent of the 1929 Great Depression and it would have been masochistic on the populace’s part to agree to more of the same. Better to vote for the unknown unknowns of rejecting the bailout conditions of the other Eurozone countries. The best consequence would be what Greek Prime Minister Alexis Tsipras claimed would happen: A new round of debt negotiations with Athens holding a trump card through the referendum. The worst, widely being seen as likely in the financial markets, would be a Greek exit from the Eurozone with all the problems that will come with establishing a new currency.
Mr Tsipras expects the Eurozone governments to come back to the table with a less demanding financial package. The first indications that all is not well is clear from the fact that these governments have decided to let him come up with a proposal first. The clock is ticking for Greece, not Europe. If Greece defaults on its next loan repayment, due on July 20, the European Central Bank will be required to cut off its financial assistance to Greece: Grexit will occur de facto. But a round of talks seems set to happen and the present status quo of ‘60 euros a day’ may continue for some time to come. However, the likelihood of such talks actually coming to a conclusion that will keep Greece in the Eurozone is less clear. Many other southern and central European states who have had to tighten their belts over debt issues say that giving Greece a special break will spur domestic anti-austerity movements. There is little public support in capital-surplus northern Europe for further concessions. The economic argument for giving Greece some breathing space is not strong, as the IMF has noted: Greece can never pay off the debt it has today.
Which is why this is now all about politics rather than economics. Does the present leadership of Berlin, Paris and others feel that the vision of European unity is important enough to defy their citizens and go for a new Greek bailout? If not, then their game will be about slowly pushing Greece out of the Eurozone in a manner that the blame for the consequences will be laid at Mr Tsipras’ feet. The European response to the Crimean takeover, the boat migrants problem and its Roma minority does not indicate a sense of higher calling. If so, Mr Tsipras should be focussing as much on designing a new drachma as on putting together a new debt negotiating team.