Early reports indicate the majority of Greek voters, roughly 61 percent, have voted “no” to the terms of a multi-billion dollar euro bailout for the Greece government.
Some of the terms of the deal include many goods being taxed at a rate of 23 percent, a reduced rate for necessities like food and water, and a movement of the retirement age up to 67 by 2022. Greek Prime Minister Alexis Tsipras called the terms “blackmail.”
Tsipras campaigned for citizens to vote against the terms, telling them it would give him more leverage in negotiating a new deal.
There is also a possibility that creditors simply walk away from a new deal altogether, leaving Greece facing default, financial collapse, expulsion from the eurozone, and, in the worst case, from the European Union.
Greek banks have been shut down since June 28. Capital controls were imposed on citizens that limited the amount they could withdraw from ATMs to 60 euros, or $66. Overseas transfers of cash was strictly prohibited except for pre-approved, necessary transactions. “People are scared,” said one Greek citizen. (RELATED: Financial Turmoil In Greece: Banks Close, Capital Controls Imposed)
On Sunday, a deputy finance minister told Greek television citizens were no longer allowed to withdraw from their safe deposit boxes. However, if banks remain closed, that won’t matter.
A former European Central Bank executive Lorenzo Bini Smaghi told CNBC a no vote would cause the banks to stay closed. “With a no vote, Greece doesn’t have a (bailout) program and will continue to not have a program unless the European governments decide suddenly to change position. The ECB cannot lend to the banks as long as there is no program, so the banks will have no additional money to serve their customers and will have to remain shut,” he argued.
Greece neared bankruptcy in 2010 after the 2008 financial collapse. The European Central Bank came to the rescue with a $264 billion dollar loan that went toward paying off existing debt, not the economy. As a result, the economy shrunk by over 25 percent in five years.
German Chancellor Angela Merkel and French President Francois Hollande are set to meet Monday in Paris to discuss the implications of the referendum.
The European Central Bank will also meet to discuss the crisis.