Next Steps For Greece: The Complete Post-Referendum Roadmap

As reported earlier this morning, a slim majority of Greeks now support a "no" vote on the referendum set for this weekend. As a reminder, it's as yet ucnclear precisely what it is that Greeks will be voting on given that, technically anyway, the last creditor proposal is now null and void after the country exited its second program after defaulting on Tuesday.

Nevertheless, the show will go on, or at least that's been the rhetoric out of Athens up until this morning and indeed, mutliple EU officials have signaled that no discussions will be possible until the referendum in complete. 

So, as we await Tsipras' response to reports which indicate he is set to concede to creditors' proposals (which may, some suspect, lead to the PM cancelling the referendum altogether) in exchange for a deal that rescues his country from the brink of economic oblivion, Barclays and Bloomberg are out with referendum roadmaps. 

From Barclays:

Other euro area governments seem to favour a referendum now, as it will finally bring greater clarity about the Greek government’s mandate. The referendum is, thus, now about euro membership and PM Tsipras future. A ‘YES’ vote would free the path for snap elections or a ‘national unity government’ (probably followed by snap elections later in the year). There are limited references for the likely referendum outcome, but recent developments may favour a ‘YES’ vote.

 

The default on the IMF has non-negligible consequences. The IMF will no longer be able to make any further disbursements to Greece until the arrears are cleared. This is particularly important in case of a ‘NO’ vote on Sunday: without additional official loans from Europe, which could help clear the arrears to the IMF, and being in default with the IMF, the Greek government will not be able to rely on external assistance and would be very unlikely to regain market access.

And from Bloomberg:

'No' Wins

If Greek citizens reject the creditors' proposal, an exit from the euro area would become the most likely scenario. An exit from the currency union has never happened before and there is no established process in the Europeantreaties. It could get messy. It's hard tosee how a deal could be found in thecontext of a No vote, with Greekauthorities coming back at the negotiation table with an even less conciliatorystance. Exasperation and fatigue are already running high on the other side of the table after five months of fruitless negotiations. Creditors are losing patience — and not only in Germany. If new negotiations were to fail, the Greek authorities could choose to leave the currency union directly or hold a new referendum on leaving. These two paths are surrounded by high uncertainty given the current state of the Greek economy, held in stasis by capital controls and bank holidays. Civil unrest would be likely.

 

'Yes' Wins

In this case, it is hard to see how Tsipras could stay in power since he is campaigning for No. In an interview yesterday, he said: "If the people vote yes, then the referendum outcome will be completely respected but I will not serve it". Fresh elections would probably follow, though he or Syriza representatives could try to strike a deal in the interim, to respect the people's decision. Talks could take a while, but having a majority of the Greek people on their side would give the creditors a stronger impetus to negotiate a new bailout. In this context, an ejection of Greece from the euro area — whoever triggered it — would be the worst possible scenario. With Greeks having effectively voted to find a way to stay in the euro, an exit would call into question the democratic foundations of the euro project itself.