Partying on the streets of Athens overnight spelled out a Europe-wide hangover on Monday, after more than 61 percent of Greeks voted to reject tough economic bailout conditions. While the poll marked a victory for Greece’s fiery Prime Minister Alexis Tsipras, it threatened to jeopardize further the nation’s crippled economy as well as the future of the European currency.
What’s the immediate impact?
All eyes now are on the European Central Bank to see whether it will maintain emergency funding for Greek lenders. The bank’s policy makers are expected to meet Monday and if the funding is suspended Greek banks would suddenly need to repay it — which could be mean the country crashes out of the eurozone.
Fears that cash would run out forced the government to close banks and impose strict withdrawal limits last week. There were long lines outside of ATMS in the Athens on Monday, with one woman who voted “Yes” to creditors’ proposals saying she was worried for the future.
“I want to be part of Europe,” she told NBC News.
The decree closing Greece’s banks only lasts through Monday — but sources told Reuters that the Greek government is expected to extend it by a few more days.
As Greece’s prime minister went into emergency meetings on Monday, Tsipras did not respond to questions shouted from reporters about whether his country would run out of money.
Outside of the meetings, 47-year-old Giorgios Kakogiannis was sweeping the streets. Kakogiannis told NBC News that he was still hoping to get his $1,000-a-month salary on Friday — though if Greece runs out of money public-sector workers like him won’t get paid.
“I voted no” for the referendum, he said. “The previous government said yes to everything and that’s why my salary went down.”
… And then what?
Eurozone leaders scheduled a summit for Tuesday afternoon to discuss their next move, but a chorus of ministers on Monday stated the ball was now in Greece’s court.
The Eurogroup of finance ministers said in a statement that it would be discussing “the situation,” adding that ministers expect new proposals from Greek authorities.
Meanwhile, German Chancellor Angela Merkel was heading to Paris for an emergency meeting with the French president.
Some expect the Bank of Greece is likely to plead with the European Central Bank to raise the ceiling for its emergency backstop, which has been frozen since the country went into arrears on a repayment to the International Monetary Fund (IMF). The Greeks are expected to make new calls for some form of debt forgiveness, citing the most recent report from the IMF which called their national debt “unsustainable.”
However, German Finance Ministry spokesman Martin Jaeger said cutting Greek debt isn’t on the table.
“Our position is well-known … a debt cut is not an issue for us,” he said, according to The Associated Press.
The International Monetary Fund said in a statement Monday that it stood “ready to assist Greece if requested to do so.”
The vote has put Greece in unknown political and economic territory, with a potential exit from the single currency now more likely than ever.
Greece now must sit back down with creditors to renegotiate bailout terms — armed with the knowledge that its citizens want it to press for more concessions.
Greece’s Finance Minister Yanis Varoufakis cheered the vote, saying he will “wear the creditors’ loathing with pride.”
“The referendum… will stay in history as a unique moment when a small European nation rose up against debt bondage,” he said in a statement. “Like all struggles for democratic rights, so too this historic rejection…comes with a large price tag attached.”
Varoufakis announced he would resign his post in order to help Greece reach a deal with creditors, saying he had been “made aware” there was a “preference” among some eurozone members that he not attend finance ministers’ meetings. He said the prime minister thought his “absence” might be helpful, stressing the need for a “proper resolution” involving debt restructuring, less austerity and “real reforms.”
“I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum,” he said. “The superhuman effort to honor the brave people… is just beginning.”
The eurozone’s top official told reporters that he wants Greece to stay in the currency zone but “we will have to see if that happens.
“There are no easy solutions,” Jeroen Dijsselbloem, who is also the Dutch finance minister, said according to the AP. “And if the government and population reject tough measures then we get to a very difficult place.”
France’s Finance Minister Michel Sapin said the ball is mostly in Greece’s court now.
“The basis of a dialogue is on the table, but it’s up to Greece to show us that it takes the dialogue seriously and that it knows it can stay in the euro and that there are decisions to make,” Sapin told Europe 1 radio Monday.
Is Greece exiting the Eurozone – a “Grexit” – really possible?
If the negotiations fail Greece could crash out of the supposedly unbreakable eurozone — an unprecedented departure.
However, Germany’s Finance Minister Wolfgang Schaeuble suggested that the outcome might not be so dire. He told Bild newspaper that Greece could be “temporarily without” the euro, rather than irretrievably out of the 19 nation club, saying that “It is clear that we will not leave the [Greek] people in the lurch.”
July 20 will mark another key moment for Greece: it’s when the country is due to repay 3.5 billion euros to the ECB. If this payment is missed, the central bank may feel obliged to cut off the remaining lifeline to Greek banks.
How are the markets taking the news?
The uncertainty over what happens next for debt-ridden Greece rattled markets on Monday. The euro pared early losses to trade down around 0.6 percent by midday, while stocks also trimmed losses after an initial fall at the open. In midday trading, the German DAX was down 1.3 percent, London’s FTSE was down 0.5 percent and the French CAC was 1.6 percent lower. Japan’s Nikkei fell 2.1 percent, while the Shanghai Composite rose 2.4 percent in volatile trade.
However, market watchers were keen to see how Portuguese, Spanish and Italian bonds would perform. A sharp spike in yields for those peripheral eurozone countries — often lumped in with Greece could cause alarm about whether Greece leaving the currency might cause regional contagion to other weaker eurozone economies.
Additional reporting by Holly Ellyatt, Matt Clinch, Keir Simmons, Cheryll Simpson, and Cassandra Vinograd.