Greek Referendum Wasn't What You Think

Voters only said they'd like to feel less pain.

What just happened?

Photographer: Chris Ratcliffe/Bloomberg

The thumping win for Greek Prime Minister Alexis Tsipras in Sunday's referendum is being celebrated as a moment of clarity -- by core supporters of Tsipras's Syriza-led government in Athens and by hawks in Europe. But almost all the assumptions on which the two groups make the claim are false. 

The first of these is that Greek voters have made it clear what they want. No, they haven't. This referendum is best described as an act of political felony. The government asked a question about two complex documents that amounted to: Would you like to feel less financial pain? This is a question that should never be put to a vote. Then the government sold an affirmative answer to that question as a route to reopen the banks, win a mandate that would force debt relief and keep the euro. What a shock: Voters said they'd like to feel less pain. 

Nor have Greeks made it clear they aren't prepared to do what it takes to remain in the euro. The vast majority of Greeks still say they want to keep the currency, and if they had been asked to choose between that and the bailout terms, the result might well have been different. That's the clarifying referendum Greece should have had in 2011, or indeed a month ago. Now it's too late, and many in the euro area will see this as an opportune moment to cut Greece loose. 

Another assumption is that Greeks will be better off once they're free of the euro, because they can finally devalue and export their way to growth. I doubt that very much, although I sincerely hope I'm wrong. This country got in trouble because its economy was inefficient and its governing elites, either corrupt or incompetent. Those conditions remain the same. 

Related: Greece Default Watch

The euro area is likewise assumed to be better off without Greece. I suspect this may well be true for the moment. In the long term, though, what happens next may be deeply damaging. To force a Greek exit, the euro area will need to cut off Greek banks -- there is no mechanism to expel a country. Then, unless Tsipras accepts bailout terms he has been resisting, his country would be so starved of cash it would have to print its own. 

The result would be a bitterly resentful nation that believes it was first driven to penury and then deliberately forced into collapse by its supposed partners in Europe. The country would also be politically unstable, run for now by neo-Marxists, but probably soon by someone else. Bloomberg View columnist Mohamed El-Erian this morning warns of the potential for a failed state, and I don't think that is hyperbole. 

QuickTake Cool War

The final false assumption about what's ahead is that Russia can't afford to bail Greece out and thus replace the EU as its primary ally. Russia has never had the slightest motivation to bail Greece out -- its interest lies merely in seeing Greece outside the euro. So long as Greece was getting handouts to honor its debts and sharing a currency with Germany, its interests would always be hardwired to Berlin, Brussels and the U.S.-based International Monetary Fund, not Moscow. Once Greece has defaulted and returned to the drachma, those cords are cut. Russia has more than enough money to make a penurious Greece financially and politically dependent. It's already signed a potential pipeline deal with Tsipras. The suggestion by Russia's deputy finance minister that Greeks might accept rubles from Russian tourists might soon not seem laughable. 

Greece is the anchor state of the Balkans, a region prone to conflict whose geopolitical future remains in post-communist-bloc transition. It has unresolved territorial disputes with Turkey and is one of the primary access routes for illegal immigrants to the EU. There's a reason U.S. President Harry Truman requisitioned $400 million ($4.2 billion in today's money) to keep Greece in the democratic camp, and developed the doctrine of the Cold War to justify it. That reason seems to have been forgotten. 

The handling of the Greek debt crisis has been a disaster. Sunday's referendum has only added to the litany of bad decisions. And now, unfortunately, you'd have to be an inveterate optimist to expect a good outcome.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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    Marc Champion at

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