July 06, 2015

Greek people voted against the austerity measures of a new bailout plan by its creditors on Sunday’s referendum. The vigorous no to the bailout plan, which entailed a strict cut in the country’s expenditure, sent shock waves through international economies, causing decline in Asian, European, and American stock markets. The prospect of Greece leaving the euro zone, some economists argue, might result in a graver economic crisis than the collapse of Lehman Brothers in 2008. There is, however, a more optimistic view that the Grexit would not have a contagious affect, as it is only a small actor in the European economy. The exit could also relieve the euro zone countries from looking after the crippling Greek economy.

Sixty one percent in the referendum voted against the austerity measures of the new bailout plan, and the creditors, including the European Commission, the European Central Bank, and the International Monetary Fund, found the outcome quite distressing. Masses throughout Europe have celebrated the result in various squares, hoping that austerity politics would come to an end. Not everybody, however, welcomed the outcome. Especially the German press took a bitter tone with the rejection of the new bailout plan. Both left and right wing newspapers predicted a gruesome future for Greece in the aftermath of the referendum. The popular daily Bild Zeitung, right on the top of a picture in its front page, which showed buoyant Greek people holding up their flags in a celebration, asked if it was the shipwreck of their country that Greeks were celebrating. The newspaper, which orchestrated a fierce anti-Greece campaign before the referendum, interpreted the outcome as a slap for Angela Merkel, who, according to the newspaper, devoted countless hours to saving Greece. The Spiegel suggested that the referendum marked the beginning of crisis-ridden weeks for Greece. German politicians also criticized Greece over the referendum results. The Economy Minister Sigmar Gabriel stated that after the referendum it was unconceivable for him to think on the resumption of negotiations. He also accused the Greek Prime Minister Alexis Tsipras of destroying the last bridges between his country and the European Union.

In the afternoon, in order to review the results of Greek referendum, German Chancellor Angela Merkel and French President François Hollande held an emergency meeting in Paris, at the Élysée Palace. To avoid the exit from the euro zone, leaders of France and Germany urged Greece to bring credible proposals to the Euro Zone Summit for reaching an agreement. After the meeting at the Élysée Palace, President Hollande stressed that the door for discussion was still open for Greece. He also told the reporters that there was not much time for the government of Alexis Tsipras to offer serious and credible proposals to remain in the euro zone. Chancellor Merkel argued that the conditions for a discussion on a new bailout fund were not yet met, and she urged Greece to put forward its proposals this week.

The referendum result is the second time in six months that the Greek public has voted against the austerity measures. In the general elections held in January, the left alliance Syriza triumphed with thirty-six percent of the vote. The Syriza movement pledged to ease the spending cuts and enhance the welfare system of the country. Alexis Tsipras, the young leader of the Syriza movement and the Prime Minister of Greece, has striven for balancing the demands of the creditors with the needs of Greek people since he claimed power. His Finance Minister Yanis Varoufakis played a significant role in the negotiations with the European Union. Varoufakis was widely regarded by other finance ministers of Europe as uncompromising. After the referendum, Varoufakis resigned in order to give a fresh start to the future negotiations.

Prime Minister Tsipras hailed the referendum results and argued that the outcome was not a reflection of a rupture with the European Union. He suggested that the no vote has strengthened the position of Greece before its creditors and proven that democracy cannot be blackmailed. The achievement of Mr. Tsipras in referendum, nevertheless, does not necessarily alter the conviction of the creditors in regard to debt payment. Greek economy is in turmoil, and its banks are expected to remain closed until Friday. If the European Central Bank turns off the credit it has long been providing to the Greek Banks, Greece cannot remain in the euro zone.

Until July 20, when Greece is supposed to pay the European Central Bank 3.5 billion euros, it is very likely that there will be rounds of talks between Greece and its creditors. Forthcoming weeks are likely to determine the futures of both the European Union and Greece.