Thursday 23 March 2017

So what happens now? Greek decision raises as many questions as it answers

Athenians are seen inside polling booths at a school in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
Athenians are seen inside polling booths at a school in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
Donal O'Donovan

Donal O'Donovan

Q: Excuse my ignorance but what exactly did Greeks vote against?

A: The ballot paper referred to the terms of a deal that had strictly speaking already been taken off the table, but in a nutshell Greeks were asked whether they would accept more austerity in order to keep rescue finance coming into the country.

In this photo take on Sunday, July 5, 2015 Greece's Finance Minister Yanis Varoufakis makes statements at the Finance Ministry after the results of referendum in Athens. Greek Finance Minister Varoufakis announced on Monday, July 6, 2015 his resignation after 'no' vote against bailout. (AP Photo/Angelos Christofilopoulos)
In this photo take on Sunday, July 5, 2015 Greece's Finance Minister Yanis Varoufakis makes statements at the Finance Ministry after the results of referendum in Athens. Greek Finance Minister Varoufakis announced on Monday, July 6, 2015 his resignation after 'no' vote against bailout. (AP Photo/Angelos Christofilopoulos)
No voters embrace as they celebrate the results of the first exit polls in front of the Greek parliament in Syntagma Square in Athens last night
No voters kiss as they celebrate the results of the first exit polls in front of the Greek parliament in Syntagma Square in Athens last night
Anti-austerity ‘No’ voters celebrate the results of the first exit polls in front of the Greek parliament in Syntagma Square in Athens last night

They said No. It means we - and the European establishment - now know that the Greeks are prepared to face the unknown rather than accept more cuts.

Q: So what happens next?

A: Greek Prime Minister Alexis Tsipras will return to Brussels today to reopen bailout talks with his anti-austerity mandate hugely boosted. The 60pc backing for his preferred No vote means the Syriza leader won support from way beyond his own core voters.

Taken together with the results of last January's election, it gives him effectively a double "anti-austerity" mandate to negotiate with the rest of the eurozone, though in reality not much else. Mr Tsipras now has more authority to push for the same concessions he was after before talks with the European institutions broke down last month, but his country is still broke.

And it still takes two sides to talk. Unless the referendum results prompt a change of heart on the other side of the table - including for German Chancellor Angela Merkel - it could well be a case of going straight back to stalemate.

French President François Hollande looks more likely to see the results as a reason to soften his stance, and potentially to break with Ms Merkel. The two leaders are meeting today.

If Greece's "partners" don't show signs of compromise today then we can take it that Greece is heading for a euro exit, but it will be the rest of the euro area that has to do the pushing.

Read more:

Q: So the No vote means it's back to the negotiating table. But what are the talks about?

A: The round of talks starting today are about the same thing they were about a week and a half ago. Greece has run out of money and needs help.

A supporter of the No vote waves a Greek flag in front of the parliament after the results of the referendum at Syntagma square in Athens, Sunday, July 5, 2015. (AP Photo/Emilio Morenatti)
A supporter of the No vote waves a Greek flag in front of the parliament after the results of the referendum at Syntagma square in Athens, Sunday, July 5, 2015. (AP Photo/Emilio Morenatti)
Supporters of the No vote chant slogans after the results of the referendum at Syntagma square in Athens, Sunday, July 5, 2015. (AP Photo/Petros Giannakouris)
Supporters of the No vote celebrate after the results of the referendum in the northern Greek port city of Thessaloniki, Sunday, July 5, 2015. (AP Photo/Giannis Papanikos)
A riot police detains a youth during minor clashes in central Athens, Greece early July 6, 2015. REUTERS/Marko Djurica
"No" supporters shout slogans and wave Greek national flags during celebrations following a referendum in Athens, Greece July 5, 2015. REUTERS/Dimitris Michalakis
Supporters of the No vote celebrate after the results of the referendum at Syntagma square in Athens, Sunday, July 5, 2015. (AP Photo/Petr David Josek)
"No" supporters shout slogans during celebrations after a referendum in Athens, Greece July 5, 2015. REUTERS/Dimitris Michalakis
"No" supporters wave Greek national flags during celebrations in Athens, Greece July 5, 2015. REUTERS/Dimitris Michalakis
"No" supporters shout slogans during celebrations following a referendum in front of the parliament in Athens, Greece July 5, 2015. REUTERS/Dimitris Michalakis
"No" supporters shout slogans and wave Greek national flags during celebrations after a referendum in Athens, Greece July 5, 2015. REUTERS/Dimitris Michalakis
Masked youth walk along a street during minor clashes in central Athens, Greece late July 5, 2015. REUTERS/Marko Djurica
"No" supporters shout slogans and wave Greek national flags during celebrations in Athens, Greece July 5, 2015. REUTERS/Dimitris Michalakis
Riot police detain masked youth during minor clashes in central Athens, Greece early July 6, 2015. REUTERS/Marko Djurica
"No" supporters wave Greek national flags on the main Constitution (Syntagma) square in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
A "No" supporter waves an "Estelada" (Catalonian separatist flag) in Thessaloniki, Greece July 5, 2015. REUTERS/Alexandros Avramidis
Supporters of the ruling Syriza party celebrate their victory in a referendum by the parliament in Athens, Greece July 5, 2015. REUTERS/Dimitris Michalakis
Supporters of the No vote celebrate after the results of the referendum at Syntagma square in Athens, Sunday, July 5, 2015. (AP Photo/Emilio Morenatti)
A supporter of the No vote shouts slogans after the results of the referendum in the northern Greek port city of Thessaloniki, Sunday, July 5, 2015. (AP Photo/Giannis Papanikos)
"No" supporters wave Greek flags by the parliament in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
A "No" supporter waves a Greek flag by the parliament in Athens, Greece July 5, 2015.REUTERS/Yannis Behrakis
A supporter of the No vote shouts slogans after the results of the referendum in the northern Greek port city of Thessaloniki, Sunday, July 5, 2015. (AP Photo/Giannis Papanikos)
A "No" supporter waves a Greek flag by the parliament in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis

Its government needs access to as much as €50bn, mainly to keep on top of its debt repayments over the coming years. Before the latest lurch in the crisis, Greece was actually taking in enough in taxes to pay for day-to-day services - excluding loan repayments - but after the banks shut for a week that may no longer be the case. If Greece secures a new deal, it will remain on the critical list. Without a deal, Greece will renege on more and more of its external debts, and its banks will be unable to access the euros needed to maintain economic activity.

Q: Are those Greek banks open or shut?

A: Shut, but due to reopen tomorrow. The Greek Central Bank last night asked the European Central Bank (ECB) to increase the amount of emergency funding available to its banks.

A decision on that will be taken by the board of the ECB as early as today. In theory, that will be a non-political decision based on factors such as the strength of the Greek banks. In reality, it will be a highly political and potentially contentious decision.

If the ECB decides the Greek banks are insolvent, it can stop further emergency loans and that would - to all intents and purposes - drive Greece out of the single currency. Potentially very rapidly - within days. That is a big call for unelected central bankers.

A ballot box is emptied by a voting official at the closing of polling stations in Athens yesterday
A ballot box is emptied by a voting official at the closing of polling stations in Athens yesterday
A woman poses with her daughter as she prepares to cast her vote in Athens yesterday
Greek Prime Minister Alexis Tsipras casts his ballot at a polling station in Athens yesterday
Mr Tsipras’s wife Betty Baziana gets out of a car at the prime minister’s office
Greek Finance Minister Yanis Varoufakis arrives at a polling station with his father Giorgos.

Read more: Landslide vote 'a sign of things to come', left-wing Irish TDs claim

Q: Hang on, this is all starting to sound like nothing has changed?

A: The Greek debt crisis is still deadlocked, that is true. The good news, such that it is, is that the Greeks themselves are less polarised than many had feared. So whatever happens now, including a possible Grexit, at least the people there have taken a calculated decision that this is something they are prepared to face. That may have been Mr Tsipras's calculation all along.

Q: What about us, is there a risk to Ireland from this?

A: In the immediate term, Ireland looks to be reasonably well sheltered from the direct impact. The financial markets will certainly be weaker today, including the euro, in all likelihood.

Investors will pull cash out of riskier assets, such as shares and some bonds, and shift them into the dollar and very safe government bonds, like America's and Germany's. Our bonds are seen as neither super safe or very risky, so could end up largely left alone. Spanish and Italian borrowing costs will rise, and in the end that means investors will look to make money out of lending in general - which is bad for the flow of credit.

But we don't do a lot of business with Greece and, in the short term, a weak euro benefits Irish exports. The longer term implications for the euro will depend how the Greek situation plays out over months rather than days. A Greek exit will damage the European economy, which is fragile anyway.

A woman leaves a polling booth to cast her ballot during a referendum vote in Athens, Greece, July 5, 2015. REUTERS/Marko Djurica
A woman leaves a polling booth to cast her ballot during a referendum vote in Athens, Greece, July 5, 2015. REUTERS/Marko Djurica
Maps of Greece hang on the wall next to a voting booth in a polling station at a school's classroom in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
The moon sets behind a Greek flag over an elementary school used as polling station in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
An elderly voter waits outside a polling station at an elementary school in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
A voter enters a polling station at a school's classroom in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
A voting official prepares documents before opening the the polling station during a referendum in Athens, Greece, July 5, 2015. REUTERS/Jean-Paul Pelissier
People prepare to cast ballots during a referendum in Athens, Greece, July 5, 2015. REUTERS/Jean-Paul Pelissier
A man casts his ballot during a referendum in Athens, Greece, July 5, 2015. REUTERS/Jean-Paul Pelissier
A man prepares to cast his ballot during a referendum in Athens, Greece, July 5, 2015.REUTERS/Jean-Paul Pelissier
A voter enters a polling station at a school's classroom in Athens, Greece July 5, 2015. Greece voted on Sunday on whether to accept more austerity in exchange for international aid, in a high-stakes referendum likely to determine whether it leaves the euro-currency area after seven years of economic pain. REUTERS/Yannis Behrakis
Ballot papers are seen on a table as a man leaves a polling booth before casting his ballot during a referendum in Athens, Greece, July 5, 2015. REUTERS/Jean-Paul Pelissier
A child casts her grandmother's ballot during a referendum vote in Athens, Greece, July 5, 2015. REUTERS/Marko Djurica
A woman enters a voting station before casting her ballot during a referendum in Athens, Greece, July 5, 2015. REUTERS/Jean-Paul Pelissier
Voting officials are seen inside a polling station during a referendum in Athens, Greece, July 5, 2015. REUTERS/Marko Djurica
Athenians are seen inside polling booths at a school in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
A man enters a polling station to cast his ballot during a referendum vote in Athens, Greece, July 5, 2015. REUTERS/Marko Djurica
A Greek Orthodox priest exits a booth holding a ballot at a polling station in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
A Greek Orthodox priest exits a booth holding a ballot at a polling station in Athens, Greece July 5, 2015. REUTERS/Yannis Behrakis
A man raises his arms as he leaves a polling booth before casting his ballot during a referendum vote in Athens, Greece, July 5, 2015. REUTERS/Jean-Paul Pelissier
A man leaves a polling booth to cast his ballot during a referendum vote in Athens, Greece, July 5, 2015. REUTERS/Marko Djurica
A woman casts her ballot during a referendum vote in Athens, Greece, July 5, 2015. REUTERS/Jean-Paul Pelissier

Read more: More uncertainty the only certainty as dust settles on that Greek vote

Q: Could the rest of the euro area carry on regardless if Greece leaves?

A: If Greece leaves the euro, there will always be a niggling feeling that others might some day follow. Compare that to the US dollar which can survive just about any kind of crisis intact.

To compensate, a Greek exit might spark a push for greater integration among the remaining euro member states - including closer budget ties and common bonds. But political resistance to any such moves will now be greater than ever.

Irish Independent

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