The meaning of Yes and No

Athens by A.Savin

Athens by A.Savin

Greece is voting today in a referendum about the Euro.  Or maybe it’s a referendum about EU membership?  Or…?

The referendum question is:

Should the plan of agreement, which was submitted by the European Commission, the European Central Bank and the International Monetary Fund in the Eurogroup of 25.06.2015 and is comprised of two parts that constitute their unified proposal be accepted?

The first document is entitled “Reforms For The Completion Of The Current Program And Beyond” and the second “Preliminary Debt Sustainability Analysis.”

This refers to a proposal from Greece’s major creditors that is no longer on the table.  So, at face value, it’s a meaningless question.  Yet the Greek government, the European Central Bank, the IMF and the world’s media all view it as immensely meaningful.  The trouble is, they disagree about the meaning.

The Italian Prime Minister, Matteo Renzi, said that Greeks will effectively be voting on whether to stay in the euro.  Many European leaders would consider a No vote a fundamental rejection by Greece of the single currency, and perhaps even of the whole EU project.

On the other hand, the Greek government claims the referendum is not about the euro, and seems to view it as a negotiating tactic to achieve better bailout terms.  Interestingly, the Greek Prime Minister, Alexis Tsipras, has suggested he will resign if there is a Yes vote, implying that — among other things — the referendum is a vote of confidence in his catastrophic leadership.  European Commission President Jean-Claude Juncker, who would like to see the back of Tsipras, is encouraging Greeks towards this interpretation.

With such contrasting ideas of what the referendum is actually asking, it’s not surprising many Greeks have struggled to decide how they should vote.  Pragmatists have given up trying to understand the question in favour of assessing the likely consequences of a Yes or No vote.

If Greece votes Yes, it’s very hard to predict what will happen.  The ECB will have to make a fresh bailout proposal, which may or may not be accepted by the Greek government, which may or may not still be led by Tsipras and his Syriza party.

The alternative scenario is perhaps clearer.  If Greece votes No and Syriza stays in power, it’s almost impossible to imagine how the country will resolve its differences with its creditors before it runs out of money and has to start issuing IOUs, in the process creating a de facto new currency.

By that interpretation, whatever the wording on the referendum paper, this looks like a pretty straightforward decision between keeping and renouncing the euro.  Indeed, both Francois Hollande and Jean-Claude Juncker have warned that a No vote will mean Greece having to leave the euro.  It will be a brave Greek voter who ticks the No box while remaining confident that their 2016 salary or pension will be coming to them in euros.