The Only Certain Thing After the "No" Vote is More Uncertainty

“No” has clearly prevailed in the referendum on whether to accept the austerity demands of Greece’s international creditors. The outcome comes after a week in which the rallies of the governing Syriza party claiming that the bailout terms were humiliating and the "Yes" camp warning that this could see Greece ejected from the eurozone.

But while the referendum’s scope was about the conditions for another bailout by the euro countries, it brings up deeper and infinitely more complex questions regarding the future of the eurozone and the European Union. Clarity and certainty are the two luxuries we are not being afforded in this tragic episode.

No one should doubt the legitimacy of the vote in which the majority of Greek citizens have expressed rejection to the terms leading to more cuts in pensions and fiscal adjustment. Referenda have been used by European governments to settle big questions so the Greek vote should carry the same weight the as the 2005 votes in France and the Netherlands rejecting the treaty to establish a Constitution for Europe.

No one should doubt the legitimacy of the vote

As the celebrations on the streets in Athens die down, it is time for a reality check. For all the difficulty in predicting the future the one thing that is for sure is that many long hours of negotiations lie ahead, with the immediately most pressing issue being whether the European Central Bank resumes its emergency cash injections into the Greek banking system.

Greek negotiators are ready to return to Brussels to relaunch negotiations and Prime Minister Alexis Tsipras says that he hopes to re-start negotiations with creditors. Restructuring the debt appears to be necessary the ECB, the European Commission and the International Monetary Fund should now finally discuss restructuring Greece’s huge debts.

Germany’s Minister for Economic Affairs and Energy, Sigmar Gabriel, already put down a marker, saying that Greece’s resounding rejection “has torn down the last bridges” that could have led to a compromise. The mood across many of Germany’s institutions still remains one of intransigence.

No one should doubt the weight Germany carries in these matters but it is far from clear whether others have quite the same appetite to cut Greece loose. While German Chancellor Angela Merkel meet he French counterpart Francois Hollande in Paris, European Commission head Jean-Claude Juncker will speak with ECB chief Mario Draghi and Dutch finance minister Jeroen Dijsselbloem will chair the working group of top treasury officials in Brussels to work out the details on how to move forward.

Those seeking certainty from what is to come will be disappointed

Amid so many moving parts, three different scenarios could emerge.

First, Greece’s creditors seek to put pressure on Tsipras by restraining access to ECB liquidity in order to provoke a regime change. Put simply, they may offer again a take-or-leave-it deal, exhausting the Greek government’s alternatives to re-negotiate a “more favourable” agreement. In the long run, this prolonged negotiation may lead to Tsipras’ resignation and elections for a new government more in line with the creditors’ requests.

Second, it can also happen that the EU institutions and the eurogroup may attempt to expel Greece from the Eurozone, provided that a legal solution is sorted out under the founding Treaty of the Functioning of the European Union and the Treaty of the European Union.

Third, that the creditors acknowledge the outcome of the referendum, and provide debt relief as an explicit part of a funding package to the Eurozone’s frailest member for the next couple of years. That would imply a shift in the current approach towards one that’s more closely aligned with citizens’ demands.

The next week will be vital in which way determining the future path of the this Greece’s latest Odyssey. Those seeking certainty from what is to come will be disappointed and those seeking to offer it likely as not to be wrong.


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