Is the Greek bailout referendum a tactic in the blame game about a possible Greek default?

Lotte van Buuren, 29 June 2015

A crucial Eurogroup meeting last Saturday crushed hopes of a deal before tomorrow’s deadline to unlock the remaining €7.2bn of Greece’s bailout programme. This last tranche of funding would enable Greece to repay €1.6bn to the International Monetary Fund (IMF) on Tuesday. Without the lifeline of the ECB’s emergency funding, a Greek default has now become inevitable and the Greek banks are in serious trouble. In order to prevent further bank runs, the Greek government has decided to keep the Greek banks shut until at least 6 July and to limit cash withdrawals to €60 (£42) a day.

The question of whether or not the Greek government should still accept the hardly changed terms of a continued bailout will be put before the Greek people in a referendum on Sunday 5 July. Considering that Greek Prime Minister Alexis Tsipras and finance Minister Yanis Varoufakis are encouraging the public to reject the creditors’ proposal, new elections may be called in the case of a “yes” vote so that negotiations with the troika could have a relatively fresh start. In the case of a “no” vote, Greece is likely to go bankrupt and may even exit the Eurozone, given that the European institutions would be unwilling to recapitalise the Greek banks.

Even though this scenario does not immediately put the Eurozone in danger, Grexit would set a dangerous precedent that threatens the stability of the Eurozone. The introduction of the Euro would no longer be irrevocable and other countries struggling to abide by the Eurozone terms, such as Spain and Portugal, would have the option of reintroducing their national currencies.

In an attempt to avoid the blame for the Greek crisis and its consequences, the creditors have been constructing a narrative of reckless, irresponsible Greek leaders who are not actually seeking an agreement. In the press conference after Saturday’s failed negotiations, a visibly irritated Eurozone chief Jeroen Dijsselbloem again stressed that the Eurozone’s door stays open for a deal. It is up to the Greeks to show that they are actually seeking an agreement that will save their country from ruin, but their actions do not suggest that this is their goal. A likely default on Tuesday and a completely unexpected referendum on Sunday fit that image.

Instead, the upcoming referendum could be regarded as the ultimate democratic measure by the Greek government. Considering that the acceptance or rejection of the bailout terms will have a major impact on Greece’s future, it is reasonable that the Greek public is offered a direct influence on it. However, the referendum also allows the Greek representatives to evade responsibility for the consequences of either continued austerity or a chaotic Grexit, which will undoubtedly be harsh regardless of the referendum outcome.

In the meantime, Tsipras and Varoufakis try to shift the blame on their European creditors for being humiliated and forced to accept unreasonable bailout terms. Whether the Greek public will accept this interpretation of the past events or whether they will get cold feet when being prevented to withdraw their desperately needed salaries and pensions coming week, remains to be seen on Sunday.