The chips are down. The political gridlock of the coalition government of radical left and right has led Greek Prime Minister Alexis Tsipras to call a referendum on the proposal of the troika (the so-called “institutions”). Incredibly, Greeks will vote by responding to a question referring to a document written solely by the troika, proving again that Greece’s problem lies on Tsipras’ personal rule and the lack of independent institutions. What’s more unbelievable is the fact that voters will be asked to decide on a technical paper that almost nobody has read and/or could read and understand in only seven days. The “institutions” just yesterday made their final proposition publicly known in an effort to inform the misinformed Greeks about the content of their (almost final?) proposal.
The government has tried to construct the question in such a way as to force the voters to decide whether they like austerity or not. But this time the logic behind it is problematic. The government has proposed a program only marginally different from what the institutions have proposed, as I showed in my previous blog post. The difference lies more on the fact that the government wants to follow, more or less, the 2010-2012 policy—followed by the troika and the government at the time—to heavily tax the productive economy. The troika is insisting on more reforms with no impact on wages and only moderate impact on certain pensions. The thing is that any structural reforms, hitting the interests of special interest group voters, will have an impact on the political market, meaning that it will hit the political clientele of the government. To be fair, this is nothing new in the Greek political market. Politics is boldly opportunistic and dictated by personal rule. This clearly has to change if and when Greece exits from the current tragic situation.
So, the country is heading into a referendum with a question that muddies the waters. If voters take it as a referendum on whether they wish to stay in Europe and the eurozone, the “yes” vote will prevail, Tsipras will resign, and then we will have either a grand coalition government with a majority of pro-European ministers or a call for new elections. In the first case, Europe—not just Greece—will begin to overcome the problem and things will begin to normalize. With new elections, we are going to see another clash of the titans between the more radical politicians—extreme-right Golden Dawn included—on the one hand, and the forces of the centre united on the other. If the “no” vote prevails, unless the Troika backs-off (which is not possible), the government, as it has already run out of money, will be forced to find ways to overcome any domestic reactions to proceed to actions leading to the reintroduction of the drachma. In that case, destabilization might seriously escalate as the January 2015 elections did not give the government a mandate for a “Grexit.” And as the government would need many months to introduce the new currency, there will be gridlock again, that will bring destabilization of a type that no one can predict. This is by far the worst-case scenario, which might destabilize the southeast part of Europe. The good news is that it is the least likely outcome.
All this drama underscores the injection of political radicalism in Europe—a form of “European Peronism”—and the likelihood that one way or another, Europe will use this perturbation as an opportunity to proceed more rapidly toward deeper political, financial, and institutional integration. But, for now, if Europe is determined to save the European dream, it needs to start by saving Greece. Right after a “yes” vote.