Last night's Greek 'no' brings Europe even further into unknown territory. Nobody knows exactly what will happen. This morning, the Greek parliament will convene to discuss the results, and for European leaders, a meeting is planned as well. In the entire Greek dossier, more factors play a part than the Greeks' too high burden of debt alone.
The chance of a Grexit, according to a Deutsche Bank economist, is 40%, the BBC reports. A return to the drachma doesn't necessarily have to mean an end to the EU membership. There are, after all, several countries within the EU that have their own currency. Over the Greek banks, the dark clouds of a solvency problem are looming. The Greek banks have outstanding loans at the ECB, with Greek bonds as security. With the current situation, in which the government isn't fulfilling its obligations, the question is what these securities are worth, and whether the ECB will support the banks. The Greek banks are said to have a billion euros in cash, enough to get through today.
Debt overview
This month, Greece has to repay 6.95 billion euros. For August, a bill of 5.7 billion euros awaits them. The biggest creditors are Germany, France and Italy. The Germans have 68.2 billion euros outstanding in Greece. France follows with 43.8 billion, and Italy is in third place with 38.4 billion euros. The IMF is in fifth place with 21.4 billion euros. The Netherlands have pumped 13.4 billion euros into Greece, Belgium 7.5 billion. The BBC put together an overview by country. The Wall Street Journal created an overview of the sums Greece has to repay in the coming months.
EU divided in left and right
The EU is divided between the hardliners, and the countries that are more forthcoming toward the Greeks. The debate thus breaks down into the classical left and right divisions, with Merkel leading the right camp. She faces a dilemma: yielding to the Greek, to the dissatisfaction of the German population. Or not yielding to the Greeks, which would almost certainly cause the country economic misery, but with support from the 'home front'.
Among Merkel's supporters is the Slovakian government. In a tweet, the minister wrote that rejecting the reforms can't mean that the Greeks will receive funds more easily. Before the referendum, Spanish Prime Minister Rajoy already said that a 'no' would lead to a Grexit.
No new Versailles
The left camp is led by France and Italy. The Italian Minister of Economic Affairs said that the country is always looking for a more integrated Europe, and that nothing will change in that stance. The French Minister pointed to the Treaty of Versailles: "Even if the Greeks vote no, it is our responsibility to prevent a repetition of the Treaty of Versailles for the eurozone." This was a reference to the treaty that ended World War One, in which heavy sanctions were imposed on Germany.
Jeroen Dijsselbloem, president of the Eurogroup, is in between these two, pointing to the necessity of reforms to help the Greek economy forward. The ECB says that restructuring the ECB debts is impossible, because that is forbidden by the bank's rules.
Geopolitics and spillover
But there is more involved. Geopolitically, Greece is important. The American government recently said this, and Germany is also worrying that Greece would turn to other countries. Here, another area of the political spectrum arises, which the government leaders have to take into account.
Finally, Europe also has its back to the wall regarding the situation in other countries. Portugal, Spain and Ireland also received an emergency package, in which the necessary reforms were demanded. Ireland, for instance, received support on the condition that the sky-high debt of the bank sector would be 'taken over' by the state. The 85 billion euro support package was paid to Ireland in 2010. And although the country is working on its recovery, and according to the official statistics the economy increased by 4.8% in 2014, the government's approach in 2010 is still a point of discussion in Ireland. This means leniency toward the Greeks could possibly result in murmurings among other member states that did bite the bullet.
