On Sunday Greeks defied Europe and overwhelmingly voted down an unpopular debt bailout package from Brussels that contains austerity measures from their creditors.
Now that 90 percent of Greece’s referendum votes have been counted, official figures from Athens show that over 60 percent of Greeks voted to reject the terms of their 3rd bailout package, creating a new dilemma for Greece’s frustrated creditors.
Greek Prime Minister Alexis Tsipras tweeted: “We proved that democracy cannot be blackmailed”.
Greeks were informed by their government leaders that voting “no” will lead to better negotiation power with their European creditors who demanded that Greeks must comply with austerity loaded fiscal reforms, including pension cuts and tax increases to help the cash strapped country to follow a pathway out of debt and successfully qualify for a 3rd bailout package.
Eurogroup President Jeroen Dijsselbloem rejected assertions from Greek Finance Minister Varoufakisand Greek Prime Minister Tsipras that Greece is not far from reaching a deal with their creditors and warned earlier that a “No” vote in the referendum would set Greece on the course of an exit from the euro area.
The decision to reject Greece’s austerity package creates a thorny situation for Greece’s creditors.
If creditors give in to Greece’s referendum decision and make special concessions with Greece’s austerity package that are more favorable to Greeks such as debt relief or less austerity, the decision will establish a new precedent and could fuel other anti-austerity movements across Europe to make similar demands to hold referendum votes in their own respective countries with their hope of “watering down” their own austerity packages.
A domino effect could occur if Greece’s creditors respond in a conciliatory spirit over the outcome of Greece’s referendum vote.
Greece’s creditors could also refuse to make special concessions to Greece, leaving the indebted country with the option of leaving the euro currency union and returning to the drachma currency, a move which could become a turbulent transition for a country that has over 25 percent unemployment.
With capital controls in place, the ECB has already frozen funds to Greece’s fragile banks that are on life support.
Greeks are only allowed to withdraw €60 per day.
European Council President Donald Tusk will confirm on Monday whether a Eurogroup meeting will occur on Tuesday as France and Germany have requested.
Eurogroup President Jeroen Dijsselbloem just tweeted about Greece’s referendum vote:
“I take note of the outcome of the Greek referendum. This result is 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.”
Greek Prime Minister Alexis Tsipras just tweeted:
“Today we celebrate the victory of democracy. Tomorrow, we will all continue our national effort to reach an agreement.”