When I wrote my article last week I was hoping, and also expecting, that the Greeks would vote Yes in the referendum.

It was not to be. On the contrary, the Greeks voted massively (61 per cent) for No.

Apart from speculating what may happen between today and Tuesday, it may be instructive to understand the reasons for the No vote.

Nowhere do people take decisions on purely economic grounds. A surer reason would have been because they follow the advice of their hugely popular leader. But then Greece, throughout its long history, has been both the cradle of civilisation and democracy and also the victim of foreign oppression, barbaric occupation – the lot. It has outgrown any period of following leaders regardless of their ideas.

The truth is the past five years of relentless austerity have been savage ones, causing very high unemployment, wiping out a whole generation, reducing the elderly to rummage around in bins having shaved off their hard-earned pensions. That is what the Greeks were voting against, especially since to vote Yes meant increasing the amount of hardship.

They were voting No because they did not trust those who were telling them to vote Yes, especially because these included the leaders of the successive governments that had brought Greece to its current state.

They voted No because they did not want to obey the dictates of the other Europeans, especially the Germans (memories of the Nazi occupation) and this was as good a way as any to punch them back.

Fundamentally, they voted No because they were without any future, so they could not be any worse off anyway.

So all these reasons militated against their voting Yes, and it says volumes to try and understand why I, and we, got it all so wrong.

Having said that, it is extremely hard to see if there is any way forward.

Fundamentally, Greece is now bankrupt. It has ended up without money, literally, and what money remains belongs to the European Central Bank. It has defaulted on its International Monetary Fund loan and may soon default on its multiple ECB loans.

Greece has become a cash-based country, if one can visualise that. Cards don’t work, and no money is allowed out of the country, so imports become impossible. This has immense consequences: the importation of medicines has all but stopped and the country faces immediate issues with regard to health. Even such commonplace medication as that required for asthma sufferers has become impossible to find.

Apart from the very technical disquisitions regarding what needs to be done, the Greek economy is fundamentally flawed. It carries a bloated civil service and the entire country is so heavily unionised that resistance to any change beats the corresponding resistance in countries such as Spain, France and Italy which have all been down this road before.

Politically, Greece is still heavily influenced by Marxist ideas, including and especially the Syriza Cabinet. Apart from a lack of understanding of what makes a modern economy tick, they are extraordinarily subject to vested interests, demos in the streets and votes used as threats.

And then, of course, Greece is heavily corrupt. Papers have spoken of an island inhabited by blind people only, due to a corrupt ophthalmologist. Early retirement is endemic. The paying of tax does not seem to be part of the national culture.

The country is structured and built on clientelism interests, the heritage of the alternating past administrations that the present one shows little inclination to resist, as witnessed by the Philippic by Liberal leader and former Belgian premier Guy Verhofstat in the European Parliament last week.

Never have we been so near to ‘Grexit’ as we are today. But whatever many might think, Grexit is no simple, cut-and-dried, solution. On the contrary, the nearer we get, the more we understand how extraordinarily complex it is.

For instance, if the ECB stops providing the bare finance to keep the banks running, or if there is a run on the banks, or if one or more banks collapse and the country runs out of cash, it is not that simple to come up with an alternative currency, such as a new Drachma. It takes time to come up with a new currency, to build in those features that, for example, enable ATMs to handle the new notes. And then it takes more time to design the new currency and make it counterfeit-proof. At least a year and more is needed. Greece simply does not have such time.

There may be stop-gap solutions such as IOUs or chits of paper, but these tend to face difficulties when it comes to them being accepted. People tend to keep to a tried and tested currency. Whatever happens, the euro will still remain such a currency. And in Northern Greece, the Bulgarian Lev is becoming a common currency as well.

People can be extraordinarily inventive when it comes to money matters, as shown by other countries that have defaulted, such as Argentina.

All this, and more, proves that, whatever the Greeks intended when they voted No, they cannot overrule the laws of economic theory. The only solution they can have is to get the EU to give them more and more money. Here, however, they run into huge problems, for if Prime Minister Tsipras could and did get the backing of his people in the hastily-run up referendum, so too can the other European partners use the referendum tool to stop giving more money to Greece.

In a way, this is already being done. For Greece to be given a new bailout, parliaments will have to meet (in some cases, as in Germany, they have to be recalled from the summer recess) and vote (twice in Germany’s case) to release more money. And in Germany’s case again, the innumerable references to the past Nazi Germany will be remembered.

But the real danger is political, not economic. Europe today has moved away from the grand inspiration that created the EU. The Greek referendum is just the latest in a series of referenda in the EU, almost all of which have ended in what was being proposed being rejected by the electorate – the Maastricht Treaty, for instance.

The crisis has exacerbated a feeling that is becoming preponderant in Europe: people are feeling cut off from the centres of power. This is primarily the reason for the emergence of Eurosceptic parties such as Syriza in Greece, Podemos in Spain, Cinque Stelle in Italy and the Far Right in France.

So far, these parties are winning the elections in which they take part.

If there is one over-arching reason why the EU must not let Greece go, it is this: Grexit will not solve anything; on the contrary, it will open a can of worms that will never be closed. This political fall-out is an even more compelling argument than any fear of contagion on the purely financial level.

 

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