Said referendum being, of course, whether they should pay the bills that their government has been racking up for some time. The Daily Telegraph explains the situation that would arise from a No vote:
…it’s game over for Greece’s membership of the single currency. The country’s banks don’t have enough money to last for much longer, and there is little reason why the European Central Bank would wish to extend them billions more if it is snubbed by voters. Either the banks would have to stay shut, which means that the country will run out of food and essentials as it becomes impossible to pay for imports, or depositors would have to be bailed in, wiping out a large chunk of their wealth but recapitalising financial institutions.
The only other alternative would be for the Greek state to introduce IOUs and then a new physical currency, while re-denominating all Greek bank accounts into drachmas. The national debt, which is owed in euros, would explicitly be repudiated, triggering a major crisis and inflicting vast losses on the European Central Bank, IMF and other creditors. The new drachmas would, of course, plummet in value, and it would be hard to avoid widespread chaos and hyperinflation if the government is forced to crank up the printing presses to pay for its bills.
I believe that the assumption here by Greece is that the European Union will not let repudiation and re-denomination get that far. I… do not think that it is wise to count on the kindness of European self-appointed ‘elites.’ At any rate: guess we’ll find out: “89 percent counted – 61.45 percent in the No camp to 38.55 percent Yes.” In my experience, if you have 61% at 89%, you call the election. Which means that now we see what the European Union will do.
On the plus side? The euro’s dropping against the dollar. If you wanted to order something online from France or Germany, now’s the time*.
Moe Lane (crosspost)
*Yes, I’m wildly exaggerating. I’m also making a joke that’s at the very edge of my fiscal vocabulary, or possibly a little bit beyond. Still, confidence in currency is still very much a thing.