In a sort of nationalistic pride, the ‘no’ vote seems to have won as citizens agreed with Greek Prime Minister Tsipras that EU leaders were acting like terrorists.
Citizens see the austerity measures as blackmail – forcing them to pay higher taxes, get fewer services just to keep their banks working.
— State of Globe (@StateofGlobe) July 5, 2015
The end result of today’s referendum vote is unclear. While EU leaders have warned that a no vote would likely result in the exit of Greece from the EU, Greek leaders see the result as having strengthened their bargaining position in bailout talks.
One way or the other, the no vote points out a striking problem with the European Union. While monetary policy is set from a central EU government, fiscal policy is set by each independent country. The disconnect can lead to exactly the result Greece is experiencing.
With Brussels trying to set Greece’s fiscal policy, it changes the agreement between partner-state and the EU governing body. If Greece had accepted the measures, the EU would effectively be running Greek fiscal policy and monetary policy. It is but one slippery step to having all policy decided by a central government.
With the vote tallied, EU finance ministers aren’t exactly sure what to do next:
There are no plans for an emergency meeting of euro zone finance ministers on Greece on Monday after Greeks voted overwhelmingly to reject the terms of a bailout deal with international creditors, a euro zone official said on Sunday.
Asked whether a meeting of the Eurogroup was planned for Monday, the official, speaking on condition of anonymity, told Reuters: “No way. [The ministers] would not know what to discuss.”
While the EU leaders don’t know what to discuss, the Greek finance minister does. He has called for an emergency meeting to discuss “liquidity.” That loosely translates to capital controls tightening even further as Reuters reports:
Deputy Finance Minister Nadia Valavani told Alpha TV that, as part of those measures, the government and banks had agreed at the time that people would also not be allowed to withdraw cash from safe deposit boxes.
What happens if Spain, Portugal, France or other financially weak EU nations experience similar fiscal problems?
The issue of debtor/creditor relationships can be extended to the United States. As American debt-to-GDP ratios continue to worsen, how will her creditors change their requirements so that the U.S. can continue spending their money irresponsibly?