On Sunday, the people of Greece will help decide the financial future of their country. With the nation already in default and capital controls in place to prevent a run on the banks, it’s up to Greece’s citizens to decide what road the country will take from here.
The referendum—which asks Greeks to either vote yes or no to a current proposal from Eurogroup leaders to extend financing to the deeply indebted country— was called for by Greek Prime Minister Alexis Tsipras amid meetings of Eurozone leaders as they tried to come up with a deal that would allow the country to avoid default. The call for a vote effectively ended discussions.
Opponents of the current proposal from the Eurogroup feel that the austerity measures put forth by the Eurogroup’s leaders—which would includes things like tax hikes, pension cuts, and reductions in government jobs—are overly harsh and punitive, and could hurt Greeks more than help them.
The plan also doesn’t really include provisions for writing down Greece’s debt—an omission that some critics, including Finance Minister Yanis Varoufakis, believe will leave the country in shambles for generations. Varoufakis has said that he would “rather cut off my arm” than sign a deal that extends or intensifies the country’s debt. He has also hinted that he would quit if the country votes in favor of the deal.
Those who are hoping for a “yes” vote contend that even painful economic terms accompanying a financing extension are better than no plan at all—especially if default to the IMF eventually means leaving the euro. For his part, Tsipras has urged voters to say no to the current proposal, and also intimated that if Greeks vote yes, he will step down. Tsipras took office with a promise to reform the austerity imposed by creditors and strengthen Greece’s position in the Eurozone. A vote of yes in the referendum would go against everything he originally stood for. “If the Greek people want to have a humiliated prime minister, there are a lot of them out there. It won’t be me,” he said according to the BBC.
Eurogroup leaders have made clear what they think about the referendum: During the final hours before default (and directly after it) the impending referendum was cited as a hindrance to even considering new proposals from Greece, which could have staved off a default or pulled the country out of arrears quickly after the midnight deadline. On Wednesday, hours after the country defaulted in its debt to the IMF, it seemed that Tsipras was keen on making the deal work, with a leaked letter hinting that he was willing to concede to many of the economic conditions outlined in the Eurogroup’s plan. Then Tsipras took to television and said that the referendum would continue as planned.
The back and forth has added fuel to the fire for those who disagreed with the idea of a referendum and have criticized Tsipras’s choices. Many feel that politicians on all sides are putting political gamesmanship ahead of the economic well-being of the country, and its citizens. In the hours leading up to the default, groups of protestors demanding that Greeks vote yes to the proposal to secure their financial future gathered in Athens. And in the days before the referendum, polls showed that Greeks were pretty evenly split when it came to how they’d vote.
Around the globe, economists weighed in on how Greek citizens should vote. Some, like Joseph Stiglitz, are in the “no” camp, arguing that the previous bailouts have been more harmful than helpful, sending Greece into a deeper economic spiral. Nobelist Christopher Pissarides, however, has urged a vote of “yes,” reasoning that a willingness to make a deal brings all parties back to the bargaining table where they can hash out the terms, while a “no” is a definitive dead end.
If the referendum reaches a “no” outcome, it means that Greece will remain in arrears to the IMF, and the question of what to do about the future of the financial system—specifically whether or not Greece will remain in the Eurozone—will need to be sorted out among Greece’s leaders without help, or funding, from outside sources.
It’s important to remember that, a “no” vote on Sunday does not mean that Greece would automatically leave the Eurozone (the frequently referenced Grexit). As my colleague Kathy Gilsinan outlined earlier this week, there are many considerations that include staying in the Eurozone, returning to the drachma, or some combination. And a “yes” vote certainly doesn’t mean that Greece’s problems are over either, the country’s debt is still massive at €271 billion, the economy is in shambles, and the unemployment rate is staggering at more than 25 percent. Nothing will fix any of this quickly.
One thing is clear: Greece’s future is decidedly undecided. And while Sunday’s vote won’t solve the many problems the country is facing, it will at least reveal which difficult path the people of Greece are taking.