Swift deal, bank normality needed following referendum

The strong victory for the “No” vote in yesterday’s Greek referendum, endorsing the leftist Syriza-led coalition’s stance for less austerity, has already sparked political developments. Late last night, Antonis Samaras, the fomer prime minister and leader of the main opposition New Democaracy conservatives, stepped down as party leader after five-and-a-half years at its helm, while the commanding “No” vote, which scored 61.3 percent, well above predictions that had forecast a close battle, provides Prime Minister Alexis Tsipras with political dominance, both at a national level and within his party, one of mixed leftist strands, from radical to mild.

Following last night’s referendum outcome, Tsipras clearly noted the result does not represent a mandate for him to break ties with the EU. The prime minister has already called for a meeting of party leaders today, to be chaired by the country’s president. This is a positive initiative as Greece finds itself closer than even before to being ousted from the eurozone.

In spite of all this, the situation that will need to be confronted over the next few days by the government and whatever Greek negotiating team may emerge will not only be difficult but also extremely perilous. The fact that a Eurogroup meeting of eurozone finance ministers has been called for tomorrow, ahead of an EU summit meeting on the same day, suggests that Greece’s EU partners are not likely to change course on the Greek ordeal. This can also be presumed based on comments made by leaders of EU member states in response to the referendum’s result.

The pressure on Greece can be expected to be relentless, especially if the European Central Bank (ECB) does not increase liquidity levels through the emergency liquidity assistance (ELA) mechanism. The country is already at the mercy of the IMF and the European Financial Stability Facility (EFSF) as to whether it will be declared bankrupt following Greece’s failure to make an IMF payment last week. Greek banks have now remained closed for a week. People cueing up at ATMs for limited withdrawals are highly concerned over the possibility of deposit losses, a fear that is being intensified by conflicting comments emerging from government officials.

Greece also faces another imminent creditor deadline, on July 20, when it must pay about three billion euros to the ECM for maturing bonds.

The real economy is being battered to the ground as all this goes on. Market activity has literally halted and many enterprises, whose liquidity levels have dried up amid capital controls, are neither able to place orders nor pay employees. Many employees are being forced to take time off.

Therefore, achieving a swift agreement with lenders and EU partners, which could normalize the country’s banking system, is an urgent priority right now. Ousting the government’s controversial Finance Minister Yannis Varoufakis from his post would increase the prospect of a deal.

It remains unknown whether any agreement that may be reached would be better or worse than the one rejected by the government and the people. Whatever deal may emerge, it will certainly be harsh as there is no easy way out of the crisis. Under the current conditions, the Greek economy is loosing blood fast, every single day, as needs intensify.

In the lead-up to the referendum, the prime minister not only promised a deal with creditors but went a step further by clearly stating it would be improved. Based on the referendum result, he convinced the majority of citizens. His promise last night of being “fully aware that the mandate you have given me is not an order to break away from Europe” stands as the measure against which developments will be judged.

These will also determine how long the Greek dancing that broke out among “No” voters last night at Syntagma Square will last.