Greece’s resounding No in Sunday’s referendum is nothing short of a slap in Europe’s face that leaves the continent’s leaders with no obvious ways out of a crisis that has confounded them for more than five years.
The vote puts Europe in what can only be described as open conflict with one of its members states, testing the cohesion of a union that its leaders have for decades claimed was built on mutual trust and solidarity.
Greeks not only rejected further austerity, but also delivered what amounts to a condemnation of a European policy that many here blame for leaving the country on the verge of collapse. The final tally — more than 60% voted No — will resonate far beyond Greece’s borders, especially in Europe’s other vulnerable economies.
In the coming hours, Europe’s leaders will have to make an uncomfortable decision. They must follow through on threats to let Greece fall out of the euro, a harried path that will cast doubts over the currency’s viability. Or they make further concessions to the country’s leftist government, a step that would further damage Europe’s credibility.
German Chancellor Angela Merkel was due to meet French President François Hollande on Monday in Paris ahead of an emergency summit of eurozone leaders Tuesday.
Muddling through, as Europe has done for much of the crisis, is no longer an option. The No vote means a Greek exit from the euro is no longer just a possibility but a certainty if Europe doesn’t intervene.
On Monday, the European Central Bank will have to decide whether to continue to prop up Greece’s teetering banking sector. Even more daunting, EU leaders will have to enact contingency plans to keep Greece from descending into chaos, as the quick result could be shortages of food, gasoline and medicine.
If Europe doesn’t respond fast and forcefully, it will risk new fissures within the bloc as anti-EU forces seek to take advantage of the crisis. Nigel Farage, leader of the U.K. Independence Party, offered a taste of what’s to come via Twitter after the vote.
“EU project is now dying. It’s fantastic to see the courage of the Greek people in the face of political and economic bullying from Brussels.”
Taken at face value, Sunday’s vote shouldn’t matter. The question on the ballot — whether Greeks accept an already-expired cash-for-austerity bailout offer from creditors — is moot.
But both sides raised the stakes in the vote. Greek Prime Minister Alexis Tsipras claimed a No would give him a clear mandate to squeeze better bailout terms out of Europe. Instead of ignoring those bold claims, leaders from the EU, Germany and other countries took the bait, saying they viewed the vote as a referendum on the euro.
European Council President Donald Tusk sought to downplay that rhetoric, striking a more conciliatory tone, telling POLITICO in an interview late last week that a negative result wouldn’t force Greece out.
Yet few in Europe anticipated such a clear victory for the No camp. Tsipras and his leftist Syriza party mobilized their supporters, culminating in a massive rally in Athens’ featuring fiery speeches broadcast live across the nation.
The Yes camp didn’t have a voice. A laundry list of prominent Yes supporters, led by the mayor of Athens, emerged only on Thursday. By then, it was too late.
Last week, German Finance Minister Wolfgang Schäuble suggested that the breakdown in trust with Greece’s leadership was irreparable. Schäuble, long a target of Greek austerity opponents, was featured prominently in the No campaign as the subject of a widely circulated poster: “He’s been sucking your blood.”
Many Germans were incensed by the depiction. In Germany, Schäuble’s handling of Greece has won him high praise. He recently surpassed Merkel in approval ratings.
As has been true from the beginning of the crisis, Germany will ultimately determine the way forward.
Merkel said last week that the door remained open for Greece to apply for a new bailout. But that is a process fraught with procedural tripwires. First, Merkel would have to ask for a mandate from the Bundestag, the German parliament.
She would ultimately win the vote, but only after a bruising debate that would expose the divisions in her party and stir public opposition to another rescue. Some members of her party were already demanding late Sunday that Greece be shown the euro exit.
Recent polls suggest Germans are split on whether Greece should leave the euro. What they agree on, however, is that Greek government is to blame for the crisis.
A new bailout would also force the question of debt forgiveness back on the table, something Germany has been unwilling to discuss in the past.
The International Monetary Fund, in an assessment published last week, warned that the deterioration in the Greek economy was so severe that some form of further debt restructuring was unavoidable.
So not only would Merkel have to sell a new bailout on top of the roughly €245 billion already extended to Athens, but also have to explain to Germans why they need to take further write downs on what they are owed.
For Merkel, the other options are no more appealing. Letting Greece crash out of the euro in the wake of the public’s renunciation of German-sponsored austerity would open Berlin to accusations that it has become too dominant in Europe and that its prescriptions have failed.
Until the negotiations with Athens collapsed last month, Merkel confronted Greece together with Hollande, in large part to avoid the appearance that Berlin is Athens’ taskmaster. But in recent days, Hollande and other French officials, under pressure from their Socialist base, have urged a softer approach towards Athens.
“We are committed to avoid a catastrophe for Greece,” French Finance Minister Michel Sapin said in a television interview late last week.
Reproduced from POLITICO