The Eurogroup statement from Jeroen Dijsselbloem after the referendum was more blunt: “This result is very regrettable for the future of Greece. For recovery of the Greek economy, difficult measures and reforms are inevitable.” The Financial Times reports that legality of a Grexit is also being debated.
According to Reuters, Tsipras has been in touch with Vladimir Putin about Sunday’s referendum. A statement from the Kremlin earlier today said Putin “expressed support for the Greek people in overcoming the difficulties facing the country,” but no plans for financial support from Russia were mentioned. Even before the country went into default, there’s been speculation that Greece has been looking to strengthen geopolitical ties with Russia, which might prove to be important should there be a Grexit.
The final referendum vote was largely a rejection of austerity and the measures at the heart of the debate on the current Greek debt crisis. The country’s unemployment rate is currently 25.6 percent, and GDP has been plummeting since the first bailout, despite optimistic forecasts that predicted the bailout deals would bring the Greek economy back to life.
Even before the referendum, economists have been calling for an end to austerity in Greece. Among them: Joseph Stiglitz, Paul Krugman (who’s been at the forefront of arguing against austerity), and Jeffrey Sachs. Though economists were divided on how Greeks should have voted in the referendum, even the ones in the “yes” camp agreed that cuts have gone too far.
Austerity has been called a dangerous idea precisely because it doesn’t seem to reduce debt. However, the European Central Bank published a paper earlier this year which argues the opposite. The debate over whether austerity actually works was reignited two years ago when a group of researchers found flawed data in one of the proofs that suggested its efficacy—Reinhart-Rogoff’s “Growth in a Time of Debt.”
In an interview with German newspaper Die Zeit (and translated to English by Gavin Schalliol over at Medium, though the post is currently offline due to copyright issues), economist Thomas Piketty had strong words for Germany, calling their moral stance on Greece’s debt “a huge joke” and criticizing Germany’s short memory:
What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.
Banks in Greece will remain closed until Wednesday, and withdrawals are still limited to 60 euros a day. The European Central Bank has just added extra pressure to Greek banks by raising haircuts (the discount on Greek collateral posted in order to access emergency funding), which affects the amount of emergency liquidity assistance—which is the only source of financing for Greek banks at the moment. On Tuesday, Greece will be expected to put forth a plan for new negotiations. It seems that Greece is now on another deadline: making a deal before their banks collapse.