We described in detail how the referendum scheduled in Greece for next Sunday, July 5, is a cynical exercise in democracy theater. The Greek people are being asked to vote on a (draft) proposal by Greece’s lenders to unlock €7.2 billion in funds, the last portion of the so-called “second bailout” agreed by the Greek government in 2012. Tsipras knew at the time he announced the referendum that the proposal expired on June 30; that was the known-well-in-advance final date for the bailout terms to be agreed if each and every one of the 18 Eurozone countries agreed. We said it was a no-brainer that they would not agree; in Germany as with some of the other countries, it would require parliamentary approval to accommodate Greece’s too-late request, and there was no reason for any of them to cut Greece slack when the government has plenty of opportunity to schedule the vote in time, so it actually would inform the government’s actions.
Instead, Tsipras has already taken the decision to miss the €1.6 billion IMF payment due June 30 and the €3.5 billion ECB payment that falls on July 20, while falsely telling Greek citizens that they have a say in this momentous choice.
— Alexis Tsipras (@tsipras_eu) June 27, 2015
As we warned for months, the ECB has been keeping the Greek banking system afloat only by stretching its own rules to the breaking point. They only needed political cover to end or curtail the backstop, which would put the Greek banking system in a death spiral. We discuss the implications in an accompanying post.
Moreover, the question being put to voters is incomprehensible to most and misleading on multiple levels. Here is a translation of the ballot:
Greek people are hereby asked to decide whether they accept a draft agreement document submitted by the European Commission, the European Central Bank and the International Monetary Fund, at the Eurogroup meeting held on on June 25 and which consists of two documents:
The first document is called Reforms for the Completion of the Current Program and Beyond and the second document is called Preliminary Debt Sustainability Analysis.
– Those citizens who reject the institutions’ proposal vote Not Approved / NO
– Those citizens who accept the institutions’ proposal vote Approved / YES.
Naked Capitalism readers are far more finance and economics savvy than most Anglophone country voters, and Anglophone countries, by virtue of being overfinancialized, likely have a higher proportion of the country that has a passing familiarity with economic and budgetary terminology than the average person in Greece. How much sense does that question make to you? As you can tell, it places the burden on you the voter to read and digest the underlying documents in order to make sense of them. (In addition, the mere use of Oxi, for no, had deep resonance. As Paul Mason points out: ” Oxi is a big act of resistance in Greece going back to the Italian occupation. Ne [‘yes’] is not such a powerful word”).
And the focus on the proposal proper obscures the broader ramifications of a yes or no vote. It simply reinforced the fact that polls have failed to give good guidance on public sentiment because they’ve generally focused on only one leg of the choice facing Greece. Do we continue to accept the pain of continued implementation of austerity, the hated so-called memorandum? Asked in isolation, the answer is a no-brainer: of course not. But the ballot does not even allude to the fact that a no vote means default and the events that snowball from that, as in the bank holiday and probable liquidation of Greek banks. As Bloomberg notes:
“Usually in democracies, it’s the technocrats and the politicians who take care of the details, while voters are asked about broader issues and principles,” said Philip Shaw, the chief economist in London at asset manager Investec. “This is a transfer of responsibility from parliament to the voters….
‘‘People will vote based on whether they want the harsh measures or not, they may not realize that they’re actually voting on whether to stay in the euro,” said Erato Spyropoulou, who waited in line at a National Bank of Greece AG cash machine in Athens to withdraw money on Saturday morning. “I don’t want the harsh measures either. I’m in debt, but I don’t want to leave Europe.””
But even that interpretation is unduly charitable. It assumes that Greek voters really were voting on the creditors’ proposal, no matter how over their head it is to assess it. But with the proposal a dead letter, what Tsipras is seeking to achieve is after-the-fact ratification for committing Greece to default and probable Grexit (the only parties that might now be able to prevent a Grexit are the lenders, and I would not bet on them being creative enough, motivated enough, or able to obtain sufficient cooperation of the Greek government to prevent it).
From the perspective of Greek citizens, the vote is an exercise in deconstruction. It has whatever meaning they choose to attribute to it. It is certainly not about the memorandum. It may serve as a de facto snap election. I’m not an expert on Greek government procedure, but it’s hard to see how Tsipras and Syriza remain in power if Greek voters see the bank holiday as ushering in a future that could be even worse than austerity. Some have already come to that point of view. From the Telegraph:
“If we default and go back to using the drachma it will be like going back to the wartime era,” added Ms [Evi] Costas. “Only this time round, the drachma will be like some useless Third World currency with no value.”….
In the meantime, those waiting at the ATMs pass the time debating how they will vote in Sunday’s referendum, not that it offers much of a choice either way. Even those who favour leaving the Eurozone seem to fear that Greece may end up like Afghanistan, or at the very least, neighbouring Albania.
As we wrote over the weekend:
So the only conceivable excuse for waiting this long is for Tsipras to attempt to save himself. If he were to reject the bailout, the decision is unquestionably his and that of his allies. That it precisely the sort of decision that government leaders are expected to make. Or he could just as well accept the bailout, recognizing that as bad as things are, that the country would be plunged into an even deeper economic sinkhole, putting the survival of even more citizens at risk. It would take forming a new coalition with To Potami and New Democracy, and that would mean that his and Syriza’s position would become far more tenuous and he would be fiercely denounced by many if mot most Syriza MPs.
Thus the referendum ruse looks to be about trying to spare Tsipras and Syriza the worst consequences of his having underestimated the creditors and not preparing for worst-case scenarios, which is another responsibility of leadership that he and his party have neglected.
And Greek citizens are beginning to see what the cost Tsipras’ and Syriza’s failure to own up to the responsibilities of leadership only after passing what appears to be an event horizon.
Update 11:30 AM: We had said in our earlier post on the surprise referendum announcement that it was an exercise in deconstruction, since a vote on a proposal that has expired has no impact on the default decision, since that is already baked in.
The Guardian reports that European officials are teaming up to tell Greek voters what the vote mean in the absence of a clear purpose. From the live blog:
Europe turns its guns on Tsipras
Two may be a coincidence, three is a trend, and four looks rather like a plan.
The eurozone’s three largest economies have all come out today and told Greece exactly what they believe Sunday’s referendum is about, and it’s not simply about choosing the old reform offer.
Matteo Renzi warning that Greece is voting to choose between the euro and the drachma makes a hat-trick.
France went first – with Francois Hollande appearing outside the Elysse Palace to declare:
It is democracy, it is the right of the Greek people to decide what they want for their future. What is at stake is whether or not Greeks want to stay in the eurozone (or) take the risk of leaving,”
And then came Germany — although Angela Merkel left it to her coalition partner, Sigmar Gabriel, to deliver the news:
— Ian Traynor (@traynorbrussels) June 29, 2015
This looks an awful lot like an effort to shift blame to Greek voters if they vote no, the ECB pulls the ripcord on the Greek banking system on July 20 when the ECB default occurs, and thing go from bad to disastrously worse. It may also be sowing the ground for a scenario we’ve discussed: an EU suspension, if a government armed with a “no” tries getting more aggressive.