The Greeks Vote NO, Setting Stage for Possible Parallel Currency and Eurozone Exit

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Greek voters have issued a surprisingly loud and clear statement of support to Greek Prime Minister Alexis Tsipras, and defiance to European authorities and the International Monetary Fund.

In the referendum celebrated Sunday, an overwhelming majority of more than 61 percent of Greeks, with an impressive 22 percent lead over the 39 percent of Greeks who voted yes, have said no to the bailout deal proposed by the country’s creditors.

Opinion polls before the referendum showed the difference between the Yes and No camps as too close to call, and therefore the strong majority won by Tsipras comes as a shock to many observers. The European authorities should consider the results of the referendum a wake-up call – the Greeks have renewed a mandate to Tsipras and his Syriza-led government to adopt a firm position in negotiations, and unambiguously shown that they are ready for Grexit – the forced exit of Greece from the Eurozone and perhaps even the European Union itself – if the negotiations fail.

Grexit could have catastrophic consequences for Greece. But the consequences for the European Union could be equally catastrophic, because Grexit would establish a dangerous precedent. In fact, as shown by the results of recent local, national and European elections in the U.K., Spain, Italy and other countries, European citizens are more and more dissatisfied with the Euro and the E.U. Therefore, Grexit could start a domino effect from which it could be very hard for the E.U. to recover, and E.U. authorities are expected to take that into account in forthcoming negotiations.

“You made a very brave choice,” said Tsipras in a TV address to Greeks. “The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution.” The Greek P.M. said he wants to keep Greece in the E.U. and the Eurozone, and promised to reach an agreement with the country’s creditors in two days, which might be overly optimistic.

Former Greek finance minister Yanis Varoufakis, who said before the referendum that he would resign in the case of a Yes vote, resigned anyway in an unexpected move. Varoufakis’ resignation is to be interpreted as a conciliatory move toward Greece’s creditors. In fact, he had played an aggressive “bad cop” role in the negotiations, and even accused Athens’ creditors of “terrorism” the day before the referendum. It’s easy to read Varoufakis’ resignation as a performance staged to offer a face-saving exit (pun intended) to Europe, and open the door to further negotiations.

“I was made aware of a certain ‘preference’ by some Eurogroup participants, and assorted ‘partners,’ for my… ‘absence’ from its meetings; an idea that the prime minister judged to be potentially helpful to him in reaching an agreement,” Varoufakis said in a statement reported by Reuters.

Reuters’ columnist Hugo Dixon notes that the Eurozone partners and the International Monetary Fund aren’t likely to offer Greece a deal significantly better than the proposal rejected by the Greek voters. Tsipras “might therefore be tempted to introduce a new currency, either to replace the euro or to run alongside it,” speculates Dixon. “Not only would this enable him to reopen the banks, it would also allow him to pay out salaries and pensions. The new currency would immediately fall to a big discount to the euro, perhaps half its value.”

In June Bloomberg Business reported that German Finance Minister Wolfgang Schaeuble said that Greece may need a parallel currency if talks with creditors fail, according to sources familiar with Schaeuble’s views. Former Greek Finance Minister Varoufakis proposed a parallel IOU-based currency, dubbed Future Tax Coin (FT-Coin), similar to a cryptocurrency in some aspects. Varoufakis is not impressed by bitcoin as a currency, but he is persuaded that its underlying technology could be put to effective use in troubled economies.

“Greece Will Adopt the Bitcoin If Eurogroup Doesn’t Give Us a Deal,” reads an April Fool’s joke posted by Varoufakis on Twitter. Could Greece adopt a parallel cryptocurrency? The idea seems taken from a science fiction novel… but the Greek crisis has had many surprising developments so far.

Photo Ggia / CC BY-SA 4.0

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