Quo Vadis Hellás?

Greece held a referendum on July 5 to decide the future of a country on the brink of economic collapse. Prime Minister Alexis Tsipras, who came to power in January by committing himself to end the austerity measures that have strangulated the country since 2010, while also promising to keep it in the eurozone and provide a better standard of life, called a referendum after failing to get an acceptable austerity plan from the Troika after months of intense negotiations.

In the referendum, Greek citizens were asked to vote on the latest proposal of the Troika, made up of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), regarding Greek debt repayment. Although the proposal had already been withdrawn by July 5, this did not matter for the Greek leadership. In a move that could only be described as either pure genius or a great blunder, the Greek government not only went ahead with the referendum, but also asked the Greeks to vote no. At the end, 61 percent rejected the non-existent deal, leaving everybody - including, it seems, Greek politicians - wondering what to do next.

The impact of the referendum will be historic, no doubt, with implications for the Greek economy, its position in the EU and the eurozone, as well as for the future of Greek politics. One of its early reflections was the resignation of the flamboyant and obstinate Finance Minister Yanis Varoufakis, replaced by the soft-spoken Euclid Tsakalotos. Beyond that, it is all little fuzzy and complicated at the moment.

Greece has been implementing austerity programs for the last five years under the watchful eye of the Troika. So the referendum not only showed that ordinary Greeks have become fed up with the whole package, it also highlighted the miserable failure of the Troika’s heavy-handed approach to recovering Greece’s debt and rejuvenating its economy.

Tsipras and his party Syriza thought a “no vote” would bring them a strong hand in the negotiation table. But more experienced eurozone leaders cut that expectation short with their immediate reactions - even before the referendum took place. Moreover, growing economic turmoil, shortage of money, and the possibility of social unrest in the country will no doubt restrict alternatives for Athens, rather than providing leverage in the dreaded negotiations. In any case, Tsipras had already negated whatever advantages were expected from the result with his last-minute letter to the creditors, attempting to allay fears that Syriza was aiming to break with the EU and the eurozone.

Eurozone leaders met in an emergency meeting on July 7 after the referendum to evaluate the new situation. German Chancellor Angela Merkel and French President François Hollande, whose countries account for almost half of the eurozone economy, also met privately a day earlier. It seems that despite a rift among eurozone members over whether to restart negotiations with Greece they will keep the door open for a possible compromise. But the ball is still in Greece’s court, not in the Troika’s as PM Tsipras indicated. He now has to come up with an acceptable plan.

Replacing confrontational Finance Minister Varoufakis was a good start. But the eurozone now needs a convincing and comprehensive strategy from Greece to solve the crisis. Only time will show whether Tsipras’ gamble will pay off. It might just as likely ruin Greece’s future altogether, forcing it out of the eurozone and the EU.

While the state and the Greek banks are running out of money, the spirit of integration and solidarity within the EU is also at risk. Thus, while the Greek government contemplates its options, there is much at stake for the EU as well. The outcome will be interesting to watch for the Game Theory lovers, but it is the Greek people who continue to suffer.