The euro zone is in a tailspin after Greece votes 'No' to bailout

Agence France-Presse
'No' supporters in front of the parliament in Athens celebrate late on July 5, 2015. Greece's Prime Minister Alexis Tsipras said that the 'No' victory in the country's bailout referendum did not mean Athens i headed for a so-called Grexit.
Louisa Gouliamaki

Greek voters overwhelmingly rejected international creditors' tough bailout terms Sunday, but premier Alexis Tsipras insisted the result does not mean a "rupture" with Europe despite fears it will end in a "Grexit" from the euro zone.

With the final tally showing the 'No' vote winning by more than 61 percent, the historic referendum represented a victory for the radical left prime minister, who said his negotiating position to secure a new debt deal was now greatly bolstered.

As euro zone leaders scrambled to work out their response, German Chancellor Angela Merkel and French President Francois Hollande called a European summit for Tuesday and declared that the Greeks' decision must "be respected" .

Thousands of pro-government supporters cheered and hugged each other in central Athens in celebration, although some other Greeks expressed pessimism that Tsipras would be able to deliver on his promises.

Figures released by the Interior Ministry showed the final tally at 61.31 percent voting 'No' and 38.69 percent voting 'Yes'. Participation stood at 62.5 percent.

'Torn down the bridges'

European leaders reacted with a mix of dismay and caution to the resounding election results, which also sent the battered single currency plummeting.

Tsipras has "torn down the bridges" between Greece and Europe, Merkel's deputy chancellor, German Economy Minister Sigmar Gabriel, told the Tagesspiegel newspaper.

Despite the Greek premier's assertions, new bailout negotiations now were "difficult to imagine", he said.

European Commission president Jean-Claude Juncker -- who had said a Greek 'No' would be "no to Europe" -- was to speak to the European Central Bank (ECB) and euro zone finance ministers on Sunday and Monday.

The head of the Eurogroup of euro zone finance ministers, Jeroen Dijsselbloem, called the Greek 'No' result "very regrettable for the future of Greece".

In Asian trade, the euro help up against the dollar after dropping in the immediate wake of the vote, changing hands at $1.1024 to claw back some of the losses it suffered in New York electronic trade where it fell at one point to $1.0987.

Regional bourses sagged in the aftermath of the vote, led by Tokyo which was down 1.61 percent as investors retreated while they watch Greece's creditors plan their next move.

In a televised address after the referendum, Tsipras insisted the vote did not mean a break with Europe. He has emphasised that euro membership is meant to be "irreversible" with no legal avenue to boot a country out.

"This is not an mandate of rupture with Europe, but a mandate that bolsters our negotiating strength to achieve a viable deal," he said.

Tsipras said the creditors -- the ECB, the European Commission and the International Monetary Fund (IMF) -- would now finally have to talk about restructuring the massive, 240-billion-euro ($267 billion) debt Greece owes them.

"This time, the debt will be on the negotiating table," he said.

Voters celebrate

Punching the air, kissing and cheering, the 'No' camp in Athens exulted as the results came through.

"This is a victory for the Greek people, a chance for Europe," said Giorgos, 25, who had rushed along with his girlfriend to join some 6,000 people celebrating their triumph.

"Spain, and then Portugal, should follow this path. We're for a Europe of the people," he said, brushing off concerns the result could see the debt-laden country plunge further into the financial mire.

"This is Europe's chance to become what it should have been in the beginning," said 37-year-old Dima Rousso.

While many of those who voted 'No' were youths hit by record jobless rates, there were also elderly people in the crowds, wrapped in Greek flags and dancing in time with the victory chants.

But the mood of jubilation was not shared by all 'No' voters, with some saying they had been confronted with an impossible choice.

"A 'No' victory doesn't mean there's any more hope for Greece than before," said Nika Spenzes, 33 and unemployed, who was walking in the opposite direction of the party.

Even 'Yes' voters were ambivalent about their camp's apparent defeat.

Paris, a 41-year-old dentist, said she was resigned rather than sad because, with the dire state of Greece's finances and Tsipras in power, there was "no real hope either way".

Greece's conservative opposition chief Antonis Samaras announced his resignation as the early results of the referendum became clear Sunday. His New Democracy party had campaigned for a 'Yes' result in the referendum.

On the brink

Greece is teetering on the brink of financial collapse. If it doesn't receive cash and loans soon from European institutions, it could still be forced to resort to government IOUs or a return to drachmas to keep its economy running.

Last Tuesday, the country defaulted on a 1.5-billion-euro repayment to the IMF, becoming the first developed country to fall into arrears to the institution. As a result, it is cut off from further IMF financing until it settles the amount.

The same day, the last bailout for Greece ran out, despite Tsipras's appeals for it to be extended until the referendum was over.

Greece was officially declared in default on Friday by the European Financial Stability Facility, which holds 144.6 billion euros ($160 billion) of Greek loans.

Greek banks are now reportedly almost illiquid after a run by panicked customers in the lead-up to the referendum, which Tsipras abruptly called on June 27 to break an impasse with the creditors.

A weeklong closure of the banks and capital controls that included restricting daily ATM withdrawals to just 60 euros ($67) and blocking money transfers abroad slowed the outflow.

But if the ECB doesn't inject emergency euros into Greece's banks in the next one or two days, more businesses will go belly up and ordinary Greeks will suffer.

Government spokesman Gabriel Sakellaridis said late Sunday that the Bank of Greece was asking for the ECB to provide money under its Emergency Liquidity Assistance mechanism.