The prime minister Alexis Tsipras announced on Saturday that a popular referendum will take place on July 5th in order to vote for or against the reformes proposed by the Europeans lenders. The Greek Parliament approved this referendum during the night between Saturday and Sunday. This announcement has created astonishment in Europe. The Eurogroup president, Jeroen Dijsselbloem, estimates that the greek government has closed the future discussion organizing this referendum.
Referendum: politic strategy or cowardice?
Does Alexis Tsipras refuse to make the tough decisions? Does he avoid assuming the last propositions of the European lenders? We could see his decision as a lack of courage. He encourages the population to vote against the propositions.
In fact, he really thinks that his country will be strengthening with a NO answer to the referendum. Another tweet illustrates that he clearly wants to say NO to the institutions.
It is a very dangerous initiative, as the “Grexit” seems to be almost inevitable. But the real danger is the reaction of the population when the banks will open their counter on Mondays.
A risk of Bank Run
Greeks are worried about their prime minister’s decision and have no confidence in the future of their country. Many Greeks withdraw their money from the banks. Some ATMs don’ even have enough money to meet the strong demand of the population. The financial system might be destabilized. If the ECB won’t increase its emergency liquidity assistance (ELA), banks risk going bankrupt. This could be a very disastrous scenario.
The ECB’s managers mentioned that the ECB is ready to still support the Greece as the ECB hold the necessary collateral. But the situation could change very quickly if the Greece doesn’t pay back the FMI loan.
What will happen if the Greece defaults?
If the Greece defaults, the value of the collateral could decrease significantly and so the ECB could interrupt its financial helps. Without the support of the ECB, the banking system of the Greece might collapse. For lack of Euro liquidity, Greece will be forced to find a parallel currency, which could probably suffer from a quick devaluation.