It is Sunday morning in Las Vegas, but in Greece is it after 9 PM, and the polls on the all-important "Yes" or "No" vote on acceptance of the outline of the agreement submitted by the European Union, the European Central Bank and the International Monetary Fund on June 25 are coming in. As I write, results are in for just over 30% of the votes cast. The Syriza government has urged voters to vote "No" and reject the proposal. Pro-Europe interests within Greece have campaigned for a "Yes" vote. Right now, just under 40% of the votes are "Yes", and just under 60% are "No". The vote is not a question of whether Greece should remain within the European Union and keep the euro as its currency. The Syriza government has stated that a "No" vote simply means that Europe must give the struggling nation more concessions. There are both political and economic issues at stake in today's historic vote. On the political side, Greece is a strategic nation geographically located near Turkey, North Africa and the Middle East. It is an important country for NATO; therefore, it is not only in the political interest of Europe, but also in the interest of the United States to keep Greece within the fold. Economically, Europe wishes to hold Greece's feet to the fire. It wishes to economically re-program the nation so that citizens pay taxes and the country makes changes to the social welfare and retirement systems, which has drained Greece's coffers and caused the economy to sink and the nation to be unable to service its enormous debt. There are eleven million people in Greece. Austerity implemented after the bailout several years ago has caused hardships for the citizenry. Greek voters elected the Syriza government, a leftist anti-austerity party, to battle with the powers in Brussels and Frankfurt. The battle has raged on, culminating in today's vote. Right now, it seems the Greek nation will stick with Syriza. The question now becomes, what does it all mean? Clearly, a "Yes" vote would mean that Greece would accept the proposal and move forward, coming back into the fold in terms of its European creditors. A "Yes" vote means Greece remains in the eurozone and the euro remains the currency of the nation. However, the result of a "No" vote is less clear. When it comes to remaining within Europe, it does not necessarily mean Greece leaves the eurozone and becomes an independent country. It does not mean that the euro will disappear and the drachma will return as a pariah currency in the world. The current government has made it clear to the populous, a "No" vote does not mean a departure from Europe, but it means it strengthens their negotiating positions in terms of getting Greece a better deal. A "No" vote could mean that Greece will continue to be on double secret probation in Europe, which has become an economic Animal House.
Europe is the new Animal House
"Animal House", the infamous comedy that portrayed a rogue fraternity within a university, pitted a group of rabble rousers against the establishment. The hi-jinks in the film caused many belly laughs. We can draw many parallels between the movie and the current situation between Greece and Europe. While the leaders of the nations operate above the fray and concentrate on the political issues that surround the current situation, the finance ministers represent the front lines in the conflict. Greek Prime Minister Tsipras, German Chancellor Merkel and French President Hollande have all been discussing the matters in a civilized manner. All parties know that it is an imperative for Greece to remain within the fold. Tsipras, the leftist Greek leader, is working to become a modern-day Greek god by cutting his country a better deal, while keeping Greece within the European Union. Merkel and Hollande are also trying to do their best. Both of them, along with the other European political leaders, wish to come to a solution. However, that solution must not set a massive precedent that will result in other southern European nations coming forth with their hands out to renegotiate austerity programs now in place. They know that the further they go to grant concessions, the more it will cost them in the end when it comes to other nations where hardships on citizens could replace current governments with leftist leaders. Spain, Italy and Portugal are all candidates to mimic Greece in coming months and years. It will be very hard for Europe to say no to these countries if they go too far in granting concessions to Greece, the poster child for problems.
In the European animal house, last week a deadline passed with both sides standing firm. Tsipras rejected a final proposal that could have led to a big fat Greek divorce. Pulling a rabbit out of the hat, Tsipras told Europe - OK, I do not like the deal you offer; let's see what the rest of my citizens say. The vote was set for Sunday, July 5 - the referendum a "Yes" or "No" affair. While another in a series of chess moves, the referendum was a brilliant move that risked all. It was unexpected, and that is the essence of drama and comedy. It was shocking.
The saga continues - the Vote
Tsipras took risk in calling for the vote. Surely, the leader would suffer a vote of no-confidence if Greek voters came to the polls with a resounding "Yes". A resounding "No" would fuel the negotiating Prime Minister, while a split vote would still prove that half the nation stands with the leftists. As of 9:42 PM in Athens, with just over 40% of the votes counted, the yes's have 38.92% and the no's 61.08% - the gap is widening, and the trend is the best friend of the sitting prime minister. It now appears, with less than half the vote counted, that Tsipras' gamble has paid off. It appears a result where his fellow Greeks will reject Europe's "final" proposal at the same time, giving his government a vote of confidence will strengthen Tsipras' position. Europe's answer is likely to come slowly. The European leaders are set to meet early in the week to discuss the situation and results of the referendum. Their option will be to continue either to negotiate bringing more concessions to the table or to cut Greece off. The latter will bring immense pressure on the Greek economy. Banks will run out of money, government payments such as pensions could stop, services will grind to a halt. It is possible that these events will give rise to civil insurrection. The European leaders will have to balance their actions with the likely results. In physics, every action has an equal and opposite reaction. In the world of politics, the same holds true. A drastic action by the EU leaders will cause a drastic result in Greece. Some will argue for a firm reaction to the vote. However, cooler heads are likely to prevail that will summon Tsipras back to the negotiating table. The real fun will come from the interactions between the finance ministers, because that is where the true comedy of errors and personalities is. Meanwhile, the likely result will be for Europe to continue to have Greece, the intransigent nation, on double secret probation.
Schaeuble is Dean Wormer
The voice of austerity is Wolfgang Schaeuble, the German finance minister. Schaeuble believes that if one borrows money, they must eventually pay it back. During the birth of the EU and the euro, Germany was confident that it could help struggling southern nations with weak economies and different cultures to learn to right their economic ships. After all, in the 1990s, the reunification of East and West Germany presented tough issues, as the East was an economic basket case. Surely, nothing could be as difficult as that reunification and the medicine necessary to merge the two economies. While Greece did not meet the minimums to join the union in the first place, the politics of a united Europe trumped the economics. However, Schaeuble stands firm as Animal House's Dean Vernon Wormer character in the real-life comedy. He has been a tough negotiator, telling the Greek finance minister, "Fat, drunk and stupid is no way is no way to go through life..." When it comes to double secret probation, Dean Schaeuble has been the heavy. When conferring with other like-minded European economic ministers about the Greeks, I am sure that Dean Schaeuble has said, "I hate these guys." Herr Schaeuble's nemesis is his leftist, outspoken Greek counterpart, Yanis Varoufakis, aka Blutarsky.
Varoufakis as Bluto - Toga!
When Dean Schaeuble met with Varoufakis, he did so, initially, from strength. When evaluating the state of the Greek economy, he might have rated it a big fat zero. I could just see in my mind's eye Herr Schaeuble addressing Varoufakis, sitting on the other end of the negotiating table in his leather jacket with a pencil up each nostril in an act of defiance and mockery towards the German. "Mr. Varoufakis, zero... point... zero"... As Schaeuble's frustration grows, Varoufakis shrugs his shoulders. After all, the Greek finance minister believes Europe shoved austerity down Greece's throat in a move of economic tyranny.
Bluto Varoufakis was party to the idea of a referendum, which is sort of answer to the European economic proposal that amounted to a call for a toga party. However, the Greek finance minister would never shed his leather jacket for a toga - or would he?
While a "No" vote is likely to have Dean Schaeuble screaming, "You're out! Finished in Europe! Expelled! I want you off this continent by nine o'clock Monday morning!" it is likely that Bluto Varoufakis has more fun and games up his sleeve, perhaps a final act of defiance. After all, this Bluto said that he would resign from his post if the nation votes "Yes" on the referendum and he would "... rather cut off my arm than accept a bad deal."
Yogi Berra - "It ain't over 'til it's over..."
It is now 10:23 PM in Athens, and with 57.71% of vote in, the no's lead the yes's 61.26% to 38.74%. 61% amounts to a landslide victory for Syriza, Tsipras and Varoufakis. Toga! Toga!
When trying to think of a quote that fully represents the situation between Greece and Europe, I could only come up with one: "It ain't over 'til it's over", which is one of my very favorite Yogi Berra-isms.
Taking a huge risk by virtue of the referendum, the Tsipras government has strengthened its bargaining position with Europe. While Dean Schaeuble will likely suggest triple secret probation for the Greeks, the landslide in Greece will probably force Europe to come forward with a new list of concessions to keep Greece within the European Union. Meanwhile, Bluto Varoufakis will keep his arm and his job. Is it over? "Over? Did you say 'over'? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell, no!" The fun will continue; however, the Greek vote is likely to cause some huge volatility in markets that will ripple through all asset classes and around the world. As I close this piece, over 90% of the votes show that 61.36% of Greeks voted "No"; the landslide is complete. For the European finance ministers who lost big on Sunday, "My advice is for you to start drinking heavily."
