What will happen if Greeks vote ‘oxi’ in Sunday’s referendum?

A 'no' vote could mean an end to austerity, but it could also mean economic collapse and Grexit
Photo: Carolina Georgatou

It has been a hot week for Greece, driven by uncertainty ahead of Sunday’s referendum on the austerity demanded by the country’s creditors. Until Tuesday, the referendum seemed likely to proceed, with politicians, political commentators, activists, economists and technocrats clamouring for the nearest soapbox, and important mainstream figures such as economists Joseph Stiglitz and Paul Krugman advocating a “no” vote to reject the Troika’s offer for more austerity without debt relief.

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On Wednesday morning, they were surprised to read a leaked letter to the creditors from the man who had called the referendum, Greek Prime Minister Alexis Tsipras. The letter was clear: Tsipras had surrendered to EU pressure. He accepted demands for further cuts to pensions and public sector wages, along with VAT increases for key businesses and essential items, with some amendments. Only last week these points of contention had led Syriza to declare the EU bailout “unbearable” and a referendum the way forward.

This hasty retreat could be explained by the fact that the letter was written in the midst of a massive display of power. In the hours approaching the deadline of a €1.5 billion IMF debt repayment on Tuesday night, technocrats, financiers and rating agencies were predicting disaster and chaos.

What happened afterwards made less sense. Many in the EU trenches called for an immediate resumption of talks, with the proviso that the referendum be scrapped to avoid any “unpredictability” and further panic in a country where the banks had shut down and ATM withdrawal limits were set at €60 per day. But German Chancellor Angela Merkel and her hawks kept insisting that no proposals could be discussed before the referendum. If Tsipras wanted to show his renewed commitment to the deal, suggested some in the Merkel camp, he should campaign for a “yes” vote.

Commentators were truly baffled when Tsipras addressed Greeks on national TV on Wednesday afternoon. He blamed creditors for trying to get rid of his government and blackmailing Greeks into voting yes, reassured viewers that the referendum would go ahead as planned, and reiterated his recommendation to vote no. He mentioned the letter indirectly, couching a “no” victory as a negotiating chip that would get Greeks a much better deal than what was currently on the table.

Strange times make for strange bedfellows

Mainstream commentators were quick to highlight Tsipras’ inconsistent tactics, alternatively pinned on “confusion” or “mischief.” Merkel’s collusion with debt repayment hardliners was more or less ignored, though it contradicted the common sense of technocracy: avoid democratic tests at all costs, drive weaker actors to compliance through threats and intimidation, but do not press the “escalate” button when it comes to a real danger of banking collapse and systemic failure.

There is some truth in the view that both Merkel and Tsipras need to maintain consensus at home, while negotiating a deal with a wide array of international forces and interests. When Merkel plays down the dangers of Grexit, she is no doubt heeding the call of German public opinion, set against giving more money to Greece. Tsipras is mediating between Syriza’s realist wing, firmly calling for a deal within the Eurozone, and the grassroots, increasingly of the opinion that it might be too late for a favourable deal in Brussels.

A popular narrative from the left highlights the apparently monolithic will of technocrats and bankers to push Syriza out and continue negotiations with a more compliant government. Are all technocrats and bankers really willing to pursue this agenda regardless of the costs? Are they so focused on their short-term goals that they cannot see the risk of systemic failure for the Eurozone if Syriza wins its bet?

The voice of (technocratic) reason, French Prime Minister François Hollande, has warned Greeks that a “no” victory would mean entering uncharted territory. He has a point, but Merkel and Tsipras are not the only ones escalating the conflict.

British Prime Minister David Cameron has threatened that Greece’s vote amounts to a referendum on their membership in the European Union, but in private Cameron may well be wishing for a Grexit.

Last week a leaked document reported he was contemplating a Grexit as a way for Greeks to sort out their economy. Meanwhile U.K. Chancellor George Osborne said on Wednesday that his own country must “prepare for the worst,” while his European colleagues were keen to reassure the public there is nothing to fear from a Greek default.

An enforcer of austerity at home — many agree that his neoliberal reforms are more wide-ranging than those of Margaret Thatcher — Cameron seems to support Syriza’s attempt to break the power of European technocrats. He may feel he could exploit Brussels’ weakness in the wake of a Grexit to push for controversial EU treaty changes that would enable the United Kingdom to introduce major curbs on migration from other EU countries, thus compromising one of the pillars of European integration: freedom of movement.

Then there is the convergence of far-right movements throughout Europe. Their adamant support of a “no” vote is more than a tactical move. Far-right supporters easily identify with calls to wrestle sovereignty away from the Troika.

Many forces aligning themselves with Syriza’s short-term goals are pursuing a different set of interests. Unlike Syriza, they are not fighting for a renewed European consensus, but for the end of Europe itself.

After the referendum: what happens if the Troika loses?

A “no” victory on Sunday might trigger an unpredictable chain of events leading to the collapse of the Greek banking system and eventually a Grexit. This is not merely neoliberal propaganda, nor is it inevitable. Much of the power to escalate (or de-escalate) the crisis is in the hands of creditors: after Greece’s default on the IMF payment this week, they could implement a number of economic measures that would bring the country to its knees. If common sense prevails, it is possible, as Tsipras claims, that Syriza could be at the negotiating table next week and bring home a decent deal for Greece. But that is an improbable outcome. Technocrats are unlikely to shake hands on their own demise.

Giving in to Greece is likely to result in a significant shift away from austerity across the Eurozone. Italy, Spain and Portugal may reluctantly comply with EU diktats now, but public opinion in those countries could easily shift in favour of a radical reversal of austerity.

This is why, despite all the risks, a “no” victory is the only way out, the only way for Greece to escape the devastations of austerity in the foreseeable future. But a “no” vote on Sunday will also have repercussions outside Greece’s borders, where it could provide a spark of hope to anti-austerity struggles everywhere.

For progressive anti-austerity movements, such a victory would open a space of possibility that would be unthinkable under the firm grip of technocratic rule. But the turbulences likely to accompany this outcome can also open political opportunities for those with less altruistic goals.

The main enemies will be Syriza’s short-term allies: far-right groups and political opportunists on the side of bankers and big capital, who thrive on chaos and uncertainty. Conventional tools of political struggle and democratic representation are proving ineffective. Despite attempts by Tsipras and Merkel to convince people that everything is under control, the ball is out of their hands, and it might remain so for a long time to come. Alternatives are already emerging from the cracks of a system in crisis.

Reactionary movements and flexible capital, however, are still a step ahead of the game.

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