Greek Referendum Result - Gateway House

On 5 July 2015, Greece held a referendum for the citizens to vote ‘Yes’ or ‘No’ to the bailout package offered by the the European Central Bank, the European Union and the International Monetary Fund. With 38.69% ‘Yes’ votes and 61.31% ‘No’ votes, the Greeks have rejected the bailout package. Akshay Mathur, head of research and geoeconomics fellow at Gateway House, comments on the possible outcomes following the Greek referendum result.

Statement:

“Now that the Greeks have voted ‘No’ to the austerity programs offered by international creditors, there are three possible scenarios that can arise.

In the first scenario, the Troika – the European Central Bank, European Union (EU) and International Monetary Fund – can agree to renegotiate the terms of austerity so as to make them more acceptable to Greece. For instance, this can mean showing leniency to the budget surplus level of 1% expected from Greece in 2015. Any renegotiation of this kind would affirm the long standing belief that European leadership will do everything possible to keep Greece within the Eurozone. This kind of commitment will impact the design of other economic unions in the offing such as the ASEAN Economic Community and the Eurasian Economic Union.

In the second scenario, the Troika can decide to have no more negotiations with Greece. In this case, some emergency funds would be made available to Greece until a more long term solution is worked out. This scenario gives Greece the chance for an orderly exit out of the Eurozone, giving financial markets enough time to factor in the upcoming economic developments.

In the third scenario, Greece may be denied any help from the Troika. This will lead to a disorderly exit from the Eurozone. Greece will have to introduce its own currency. There is no precedent for this and therefore the impact on the country and the financial markets is hard to quantify. Financial assets and transactions will have to be denominated in the new currency, and the central bank will have to create new policies and regulatory frameworks.”