ATHENS // Greeks appear to have voted against accepting further austerity in exchange for a new European bailout, increasing the chances of the country having to abandon the euro and plunging its economy deeper into an abyss.
With a fifth of votes counted from a national referendum on Sunday, 61 per cent of Greeks backed prime minister Alexis Tsipras by voting “no” to proposed for spending cuts and tax hikes. About 39 per cent voted to appease creditors, according to early results from the interior ministry.
Three opinion polls conducted during the voting had indicated a No win, but by a much tighter margin.
Hundreds of No voters began celebrating in Athens after the early results were released. Chanting slogans, waving Greek flags and holding aloft No placards, celebrators flocked to the city’s Syntagma square and gathered in front of parliament to claim victory.
However, Greece now enters unknown economic and financial territory, with no clear path to continued European aid and banks closed since Mr Tsipras suddenly abandoned talks with creditors to call the referendum a week ago. The country’s immediate fate lies with the European Central Bank, which may take its cues from European Union leaders as to whether it can keep emergency loans flowing to a country without the prospect of a bailout package.
“If confirmed, the ‘no’ would not put Greece on autopilot towards Grexit,” said Holger Schmieding, an economist at the financial group Berenberg. “But it makes it much more difficult to still avoid that fate.”
The result is likely to roil financial markets and reverberate across Europe’s political establishment after a confrontation that has torn up the rulebook on how Greece engages with the euro region.
It is also a victory for Mr Tsipras, whose surprise decision to call the vote, and to campaign for the “no” side, was condemned by European leaders. They largely characterised the plebiscite as a vote on membership in the euro itself, though Mr Tsipras insists Greece can stay in regardless.
The question for German Chancellor Angela Merkel and fellow leaders is whether they can negotiate with a government that has rejected their latest conditions for staying in the 19-member currency union, after forcing countries such as Portugal, Spain and Ireland to suffer through similar measures.
Ms Merkel and French president Francois Hollande will meet in Paris to discuss the Greek situation on Monday.
Mr Tsipras, 40, swept to power in January after campaigning to end crippling budget cuts forced upon the country by creditors and promising to restore “dignity.” Five months of protracted and often antagonistic negotiations followed and optimism for a deal toward the end of June was suddenly dampened when he called the referendum.
The country meanwhile is buckling under the strain of capital controls and at risk of undoing four decades of integration with Europe. Banks are running low on cash and will struggle to re-open without significant new aid from the ECB.
The question on the ballot paper leaves some wiggle room for negotiations, since it applied to conditions on a bailout package that ceased to exist when talks broke off.
Tsipras’s government “will make every effort to close an agreement soon” with creditors, spokesman Gabriel Sakellaridis said in televised comments.
Finance Minister Yanis Varoufakis said in an interview last week he expected a deal to be done however the referendum went, though he would step down should it be a “yes” vote.
Greece has flirted with losing its place in the euro before, in 2011, when then-premier George Papandreou threatened to call a referendum. That too was framed by European leaders as an in-out decision on the euro, but was scrapped before it could be held and led to Papandreou’s departure.
Since Syriza came to power, the government has been trying to unlock about 7 billion euros from an existing bailout to meet payments to its creditors. That rescue package expired on June 30, the day the country missed a payment to the International Monetary Fund -- becoming the first-ever developed country to do so.
* Bloomberg with additional reporting from Agence France-Presse
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