Why Greece’s July 5 Referendum Will Not Matter

Despite being framed as a historic vote for Greece, Sunday's referendum in and of itself holds little weight in upcoming

The biggest news emanating out of Europe this week was the developments in Greece leading up to Sunday’s July 5 referendum vote that will finally seek a measured verdict from an exasperated population – or will it?

To recap, roughly one week ago, negotiations between the Eurogroup lenders and the Greek government, spearheaded by Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, abruptly broke down with calls for a snap referendum to take place on July 5, 2015.

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The terms on the table for the referendum seemed to have oscillated back and forth, namely as the conditions of the proposed bailout in question by Eurogroup lenders no longer exist. Indeed, this mood seems to be reflective amongst the Greek population, many of whom are not exactly sure what they are voting for, or what the ramifications of each decision will actually entail.

As for the prospect of a ‘No’ vote, Mr. Tsipras has reiterated that this decision would not go hand in hand with expulsion from the Eurozone, something 4 out of 5 Greeks seem opposed to doing. By extension, the propensity of a Grexit from the EU is certainly an idea being contemplated right now amongst the Eurogroup, however preserving the currency union seems to be the preferred course of action.

Alternatively, a ‘Yes’ vote presents its own enigmatic endorsements of austerity and additional bailout measures, eliciting structural reforms for the embattled country. Far from being a panacea, a ‘Yes’ vote prevailing could lead to political upheaval, as Mr. Tsipras and Mr. Varoufakis would likely relinquish their positions – either voluntarily or via subsequent elections.

A Vote for ‘The People’?

Greece is the cradle of democracy and its decision to extend such a vote to its public represents the most broad-based approach to an issue that is as complex as any faced in Greece’s history as an EU member. Proponents of the referendum are quick to point out the historical significance of such a marquee vote and the empowerment of the Greek people.

And yet, decisions of this magnitude can seldom be explained or decided in binary terms – the course of action on how to handle or implement reforms such as pension cuts, abolishment of island tax exemptions, and debt forgiveness have alluded Europe’s foremost minds for months, a quandary now pitched to the general public to decide on in just a few days time.

The modern day Greek referendum also draws little parallels to its ancient predecessor. Historians will recall that the original Athenian assembly only allowed all of the city’s free male citizens to vote, and only after accruing two years of military service.

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Under optimal conditions, a majority consensus will emerge from the Greek population that either opposes austerity measures and additional bailout reforms with a ‘No’ vote, or an endorsement and support of the aforementioned measures will emerge with a ‘Yes’ vote carrying a majority. Unfortunately, every indication from recent polls conducted in Greece is that the referendum is poised to be an extremely tight affair and is too close to call presently.

Mired Outcome

Regardless of which vote prevails on Sunday in Greece, and at this juncture no polled result within an acceptable margin of error has presented a majority, Greeks will once again find themselves in a tug-of-war between two competing factions.

In the event of a ‘No’ vote winning by a slim majority, it is unlikely that Mr. Tsipras will be able to leverage the outcome into a better position for negotiations with the Eurogroup lenders, who have been resolute in their stance to stick to a number of key reforms. Rather, this outcome will simply indicate that by a slim minority, Greeks are opposed to widely unpopular austerity measures and are seeking a better deal – a revelation that was already abundantly clear months ago.

Conversely, if a ‘Yes’ vote manages a tight victory, it is unlikely that Mr. Tsipras will take this as an end-all verdict for his crusade to abolish austerity reforms. Instead, this finality would simply reveal a schism in the population, with a number Greeks of supporting additional reforms by the smallest of margins.

In the end, it is unlikely that either scenario will foster a change to the status quo experienced in Greece leading up the referendum. German Chancellor Angela Merkel’s steadfast refusal to accept recent Greek proposals ahead of the vote suggests that the Eurogroup is collecting itself for the next phase of negotiations regardless of the outcome.

Meanwhile, a return to virtually congruent negotiating conditions that were present a week earlier between Eurogroup lenders and the Greek government will have taken a harsh toll on the country’s population. While a week of capital controls and pension rations has ultimately helped avert a Greek insolvency, euro notes are running dry and tensions are close to boiling point.

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