Referendum Results: Greece Votes “No”

While we celebrated our independence this past weekend in the States, Greece willfully entered what may be the most uncertain era in the long history of their country.

In a result that shocked international experts—as well as the country’s European creditors—Greek citizens voted on Sunday to reject the terms offered for additional bailout funds to rescue the embattled nation from its current economic crisis.

The referendum results showed approximately 61% of the voters who chose to reject the demands of those creditors. Prime Minister Alexis Tsipras called for the referendum vote last week, amidst a week-long restriction on financial transactions within Greece. The extended shutdown of financial institutions was imposed to stop a run on banks that worsened after Greece missed its debt payment to the International Monetary Fund.

Prime Minister Tsipras was jubilant following the referendum results, claiming he now had a stronger position with which to negotiate a settlement. Government representatives have said they believe a deal is possible within the next 48 hours.

Other European heads of state and finance ministers are not as optimistic, calling the outcome ‘very regrettable for the future of Greece.’ The Eurogroup, a collection of 19 area finance ministers, have scheduled an emergency meeting for Tuesday to discuss their next step.

Last week, several government officials throughout Europe warned that a ‘no’ result would end any possibility of further bailout funds becoming available to Greece.

Impact on Citizens

As of Monday, banks in Greece remained closed—and the situation is likely to worsen. Experts told Business Insider that not only were banks very unlikely to re-open tomorrow, but that ATM withdrawal limits—currently at 60 euros (or $67) per day—would potentially be reduced further.

Impact on You

Last week, Retirement Media Inc. reported that a dangerous precedent would be established regardless of the referendum’s result. Sure enough, evidence of such an outcome is already present in the form of market volatility. The Dow Jones tumbled to open the week and global markets are reacting in a similar way. Japan’s Nikkei 225 Index dropped 2.1%, while France’s CAC 40 dropped 1.2%.

What Happens Next?

The Eurozone ministers face a difficult decision starting with tomorrow’s meeting.

A refusal to negotiate with Prime Minister Tsipras and his government would all but seal Greece’s fate, forcing the country to take the unprecedented step of vacating the Euro currency. The desperation of other nations to avoid this outcome was apparent on Monday, as they quickly reconsidered their stance on the ‘no’ vote in scheduling tomorrow’s emergency meeting of the Eurogroup.

But could the negotiation of a bailout set an even more dangerous example? Imagine you represent Italy or another highly debt-leveraged nation: you watch the Greek saga unfold, only to see your government and others reach a settlement after Greece has defaulted on its debt. Would you be willing to impose spending restrictions on your citizens to clear your debts? Or would you simply wait for the deadline to expire so you could negotiate more favorable settlement terms?

If Greece and other nations are able to use default as a negotiation tactic, the devaluation of the Euro will become quickly evident across the global economy—a problem already being observed in global markets, where the Euro has lost approximately 20% of its value (against the U.S. dollar) in the past year.

As interesting as the past few weeks have been in the Euro zone, the best (or worst) may be yet to come.

Phil Cannella
Partnered with CBS Radio Network, Phil Cannella reports on the issues most important to the American retiree.
Phil Cannella
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Phil Cannella

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