There is one word which can explain domestic developments in Greece over the past few days: uncertainty. Following an unexpected decision by Prime Minister Alexis Tsipras, Greek citizens will vote on Sunday in favor of or against a recent proposal made by the country’s creditors to guarantee further financing.
However, the question to be asked in the referendum is misleading because the creditors’ proposal is no longer on the table. Within this context, leaders of eurozone countries connect the referendum result with Greece’s future in the common currency area. Examples include German Chancellor Angela Merkel and French President Francois Hollande. In their view, a “no” might even lead to a Grexit while a “yes” could open the window for a future agreement.
Due to the credibility deficit of the Greek side, the creditors are not prepared to discuss the issue further before the final result is announced. Although isolated by all its eurozone partners, the government is campaigning for a “no” and is attempting to persuade public opinion to endorse its cause, arguably in order to strengthen its bargaining position.
Under the current circumstances, the coalition government of Syriza and Independent Greeks seems to be in a trap of their own making.Its failure to renegotiate with its partners after the election of Jan. 25, 2015 limits the possibility of taking a different course of action in future talks, should they take place.
The closure of banks has caused chaos in Greek society and creates anger even among supporters. The Greek economy will not be able to survive without fresh liquidity by the European Central Bank. Therefore, a “no” will bring the asphyxiation closer, increasing the possibility of a credit event and the need to introduce a new currency.
Even a “yes” will not solve the problem. The stance of Syriza and Independent Greeks is now unclear as they might be under pressure to resign.The formation of a unity government will then be required. This potential unity government would need to receive a confidence vote in parliament in order to immediately proceed with an agreement with Greece’s creditors. Additionally, the scenario of an early election should not be excluded.
What is now worrying about Greece is that the population is highly divided and most are ignoring the truth. This truth is that the future will be hard, whatever the outcome.