The Greece referendum of July 5 2015

Dear PGM Capital Blog readers,

In the early morning of Saturday, June 27, 2015, the July 5, 2015, referendum was announced by Greece Prime Minister Alexis Tsipras  and ratified the following day by the Greece Parliament and President.

Voters will be asked whether they approve of the proposal made to Greece by the EU, the IMF and the ECB during the Eurogroup meeting on 25 June.

The proposal consists of two documents, titled: Reforms For The Completion Of The Current Program And Beyond andPreliminary Debt Sustainability Analysis.”.

The question will contain two choices stated as “Those citizens that reject the proposal of the three institutions vote ‘Not approved/No (OXI)'” and “Those citizens that agree with the proposal of the three institutions vote ‘Approved/Yes (NAI)'”.

Greece July 5, 2015 -Referendum Ballot-

It will be the first referendum to be held since the republic referendum of 1974, and the only one in modern Greek history.

The European Commission gave its view on the referendum on 29 June, in a speech by Jean-Claude Juncker, its President.

Jean-Claude Juncker

It said it was disappointed both at what it said was the Greek government’s “unilateral withdrawal” from negotiations to clinch a new bailout extension agreement, and at their choice to now instead put a question about a not yet mutually agreed proposal to a referendum, with advice to the Greek people to vote “No”.

The Council of Europe stated that the Greek referendum does not meet European standards, as voters were not given a two-week period to make up their minds, as non-binding guidelines recommend. Due to the hasty schedule, the Council of Europe was not able to send election observers and the Greek government had not requested them either


“YES” or “NAI”
Greeks who vote “yes” in the referendum will be casting a vote in favor of Greece remaining a part of the 19-member eurozone.

The vote is an acceptance of bailout funds in exchange for Greeks agreeing to budget cuts and other austerity measures set forth by Greece’s three creditors—the International Monetary Fund, the European Central Bank and the European Commission.

A majority of Greeks voting “yes” would also signal that the country has largely lost faith in prime minister Alexis Tsipras and his left-wing Syriza-led government.

The outcome could force leaders to resign, which would usher in a new provisional government.

Greek Finance Minister Yanis Varoufakis said on Friday that he will resign if Greeks back the bailout.

“NO” or “OXI”
A “no” vote on Sunday is a rejection of the austerity demands of Greece’s international creditors. The Greece prime minister, Tsipras tried to reassure Greeks this week that a vote against the bailout would allow him to sit down with the country’s creditors in a stronger negotiating position. The result, he said, would be a new bailout deal with better terms.


The “troika” of creditors, however, have said they are unwilling to renegotiate. If that’s true, and “no” voters prevail in the referendum, Greece risks an exit from the eurozone.

With more than 50 percent of the votes counted in the Greece bailout referendum, according with the Greece ministry of internal affairs “NO” or “OXI” is leading with approx. 61%.

Below video for the Telegraph, gives an impression of the total Greek debt which is approx.  323 billion Euros, or 180 percent of Greece GDP.

Below image gives a breakdown of Greece dept per creditor.

What a ‘NO’ (OXI) vote means for:

The Government
While the Syriza party and Mr. Tsipras and his fellow ministers have survived the referendum, they still need to take immediate action to stabilize the country.

If the prime minister is right and the eurozone responds to a NO vote by offering a fresh round of bailout talks he will still have try to hold together a country close to social breakdown. However, if Mr. Tsipras is wrong and the creditors cut off Greece’s banking system that is when the horror show really begins.

He will need to implement emergency measures to pay public sector workers and recapitalize the banks. This would probably mean issuing state IOU’s as a form of parallel currency, while also commissioning the printing of drachma notes.

Under these circumstances Mr. Tsipras would need to explain to an angry and frightened Greek population why he got it wrong when he said NO would lead to more talks and was compatible with Greece remaining as a full member of the Euro.

The ordinary Greeks
Mr Tsipras claimed the banks will open on Monday, July 6, if the people vote NO but it is virtually certain their savings would remain locked up for some considerable time.

If creditors turn of the funding taps to the banks and the Government is forced to recapitalise them with IOUs Greek people would find the effective value of their savings instantly devalued at a stroke.

Companies that have borrowed from abroad in Euros would have no choice but to default, resulting in a cascade of failures and yet another surge of unemployment.

As a consequence of this, the economy would free fall.

However over time – it is hard to say how long –  it is possible that the Greek tourism industry might get a boost from a return to the drachma and that other exports would pick up too. But there would certainly be a period of severe pain.

The creditors:
Having been spurned in a popular vote they would face one fateful choice above all others: do they cut off emergency funding for the Greek banking system and precipitate a full-blown financial meltdown on their door step?

If they do, they would probably have to send emergency aid in order to avert a humanitarian disaster as imports dwindle and vital supplies of food and medicine dry up.

Creditors would also face a huge problem over Greece’s place in the European Union.

Vox Populi Vox Dei:
Now that Greece has delivered a dramatic, unexpected and sensational rejection of the terms demanded by its creditors in return for aid, it put itself closer to leaving the Euro.

We are afraid that “OXI” might be a synonym with “GREXIT“.

German chancellor, Ms. Angela Merkel and France president, Francois Hollande agreed that the referendum result should be respected and called for eurozone leaders summit to be held on Tuesday, July 7.

As a consequence of the result of the Greece referendum, we expect the Global capital markets to fall sharply on Monday, July 6.

We believe that the result of this Greece referendum has complicated matters more for Greece as well as for its creditors, and that Global Capital Markets will experience very high volatility with sharp correction in the coming days ahead.

Until next week.

Yours sincerely,

Suriname Times foto

Eric Panneflek

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