While the vote sharply consolidated the prime minister’s popularity, that could fade quickly if he leads the country deeper into bankruptcy and financial chaos.
ATHENS, Greece — Now comes the hard part.
Prime Minister Alexis Tsipras may have won a victory at home Sunday as the Greek people dealt a resounding “no” to European austerity policies.
But Greece risks paying a high price for that decision. While the vote sharply consolidated Tsipras’ popularity, that could fade quickly if he leads the country deeper into bankruptcy and financial chaos, creating a new round of instability with consequences for Greece and the broader European project.
If anything, Tsipras is likely to find it harder, rather than easier, to strike a new financing deal quickly with European creditors, heightening the risk that Greece will careen out of the eurozone unless Europe decides to give Tsipras and his defiant nation another chance.
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“Tsipras has put himself in an untenable situation,” Wolfgango Piccoli, the managing director of London-based Teneo Intelligence, said in a report. He must choose between “embarking on a journey that brings his country closer to Grexit, or restarting negotiations by submitting an offer more responsive to his lenders’ demands — despite having campaigned successfully for tonight’s ‘No,’ ” Piccoli said.
At the same time, analysts said, other European leaders share some of the blame for bringing the confrontation with Athens to a head, by insisting on a rigid adherence to institutional rules for Greece, even after showing flexibility for larger countries like France in the past.
And while the no vote left many European officials dumbfounded Sunday, it may also offer them an opening to climb back from their insistence on rigid austerity terms and to acknowledge that those policies are not a panacea for Europe’s long-running debt crisis.
“What we need now is more wisdom from both sides,” said Loukas Tsoukalis, the president of the Hellenic Foundation for European and Foreign Policy, an Athens-based think tank. “Greece can’t go on because we’re on the edge of cliff,” he said. “After all this, the question is whether our partners would be so unwise as to push Greece over the edge, because that would be damaging for everyone.”
Some European officials acknowledged Sunday that greater flexibility might now be needed from their camp. Just as the referendum vote divided Greece, so, too, did it reveal fault lines between those European countries that appear willing to bend to keep Greece in the eurozone, and others, including Germany and the Netherlands, whose policymakers have all but suggested that the eurozone would be better off without Greece. France’s finance minister, Emmanuel Macron, called Sunday for creditors to resume political discussions with Greece immediately, and warned against punishing the cash-strapped country for a no vote.
In Italy, Prime Minister Matteo Renzi also called for Europe to come back to the negotiating table quickly.
By contrast, in Germany, where the Greek vote has also polarized the public, Sigmar Gabriel, the leader of the Social Democrats, the center-left partners in Chancellor Angela Merkel’s governing coalition, said after the vote that Tsipras and his government “are leading the Greek people down a path of bitter sacrifice and hopelessness.”
But whether cool heads prevail remains to be seen. A government spokesman said Tsipras was ready to travel to Brussels immediately to resume discussions with lenders. Greece’s finance minister, Yanis Varoufakis, talked Sunday of healing wounds. Yet he also accused creditors of planning to close banks and humiliate Greece.
As it is, both men’s credibility with European leaders has been severely eroded. After Sunday’s vote, returning to the table with a demand for less austerity will hardly be viewed as an olive branch.
Nonetheless, to the extent the vote consolidated Tsipras’ power within Greece, other European leaders have no alternative but to continue doing business with him.
“Tsipras is the direct result of austerity; he is a creature of the creditors’ own making,” said Paul De Grauwe, a professor of political economy at the London School of Economics. “Creditors will have to accept him again because he will be backed by popular support.”
Even if Tsipras shakes up his Cabinet and brings in more moderate figures from the leftist Syriza Party as of Monday to deal with lenders, they will still go to the table with a negotiating position that lenders are likely to find unpalatable.
“If there’s a will by creditors to get everyone back at the table, a deal could be done,” said Simon Tilford, deputy director of the Center for European Reform in London.
But the political impact of a no vote may be too bitter a pill for influential member states like Germany to swallow, he said.
As it is, the bailout package that Greeks voted on Sunday is no longer even on the table, having expired officially last week. That means that negotiations would have to begin on a new package of aid, which will be much more costly after the chaos of recent days.
The economy, which has already slumped back into a recession, has worsened drastically amid the political and financial chaos. And the imposition of capital controls at Greek banks since Tsipris’ call for a referendum may have doubled or tripled the cost of any new bailout, said Mujtaba Rahman, the chief eurozone analyst at Eurasia Group, a London-based analytical firm.
A new aid package may be some $20 billion to $30 billion more expensive than if capital controls had not been in place, the group estimated.
“What happened in the last six months took us back economically more than a year,” said Tsoukalis, the head of the Athens think tank. “Even under the best scenario, Greece will pay a heavy price.”