ATHENS—Greece's overwhelming rejection of creditors' demands in
Sunday's referendum is a big win for Prime Minister Alexis Tsipras,
but doesn't change what so far has been an impossible task:
securing a place in the euro without accepting harsher
austerity.
If the coming collision between Mr. Tsipras and his lenders
leads to Greek debt default, bank failures and euro exit, Sunday's
adulation could soon turn to fury, analysts said.
German-led creditor countries are staunchly opposed to financing
a Greece that rejects a far-reaching, market-oriented overhaul of
its economy.
Mr. Tsipras persuaded many Greeks to vote "no" on Sunday by
arguing that such an outcome would strengthen his bargaining
position vis-à -vis the rest of the eurozone and the International
Monetary Fund. Following a "no" victory, he would reach a better
deal with creditors within 48 hours, he said on Thursday.
Many Greeks trusted him to achieve the two outcomes they crave:
an end to unpopular austerity measures such as pension cuts and a
secure place in the euro.
Yet a swift deal is unlikely, European policy makers have made
clear. Greece's bailout program, operating since 2010, expired on
Tuesday. Athens must now apply for a new aid program from the
eurozone's main bailout fund, the European Stability Mechanism,
beginning a potentially lengthy negotiation process.
Germany and other lenders say they would continue to uphold the
fundamental principle of eurozone bailouts since Europe's long debt
crisis began: Rescue loans are only available in return for strict
fiscal discipline and economic overhauls to make struggling
economies such as Greece more competitive within the eurozone and
the global economy.
At Mr. Tsipras's urging, Greek voters have now decisively
rejected the very economic policies that Berlin and the IMF insist
are essential if Greece is to achieve sustainable economic growth
inside the eurozone.
Fresh financing appears more remote than ever. Time is running
out before Greece must repay a large bond held by the European
Central Bank that falls due on July 20. Default could lead to the
ECB withdrawing liquidity support for Greece's banks, pushing them
into insolvency. The banks have been closed for business for the
past week.
The potential failure of Greece's banking system is the most
likely trigger for a Greek exit from the euro, economists say.
Without central-bank financing in euros, Greece would have to print
its own currency to keep its banks alive.
Around 70% of Greeks want to keep the euro. Many would view an
exit as a major betrayal and deception by a prime minister who
promised them they could and should vote "no" and still keep the
common currency.
The result is "an electoral win, but it could prove to be a
debacle for the nation and potentially for him as well," said
George Pagoulatos, professor of European politics and economy at
the Athens University of Economics and Business.
"Support for the euro in polls is the highest it has ever been,
so the result is a mandate to negotiate for a better deal within
the euro," Mr. Pagoulatos said.
But creditors have warned over the past week that a "no" vote
would amount to a rejection of the rules of nations' coexistence in
the eurozone.
For some among the creditors, the damage may be
irreversible.
Mr. Tsipras's provocative speeches over the past week, in which
he accused creditors of blackmail, have helped his campaign for a
"no" vote, but they also exhausted the meager goodwill of other
eurozone governments toward the Greek leader.
Officials from Germany and other creditors have said the next
bailout program—if there is one—would require tougher measures than
those Greeks would have rejected in a "no" vote, because Greece's
economic outlook is deteriorating because of its closed banks and
capital controls.
"It is very likely he will end up with a deal that is worse from
the one we turned down," said Loukas Tsoukalis, director of the
Hellenic Foundation for European and Foreign Policy, an
Athens-based think tank.
Matters could come to a head well before July 20, when Greece's
ECB payment is due. Greek banks have scant cash left, and even with
ATM withdrawals capped at €60 ($66) per card a day, their cash
could run out within days, bankers say.
If the banks stop giving out cash, and no deal with Europe is in
sight, the pressure on Mr. Tsipras could accelerate sharply,
analysts said.
Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com
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