What Does Greece Do Now?
On Monday morning, European markets were reeling after Greek voters' decision to strike down the bailout deal offered to Greece on Sunday.
The nation's voters stood firmly behind Prime Minister Alexis Tsipras and the leftist Syriza government, who promised to reach a new bailout deal with the EU in the 48 hours following the vote. However, the general consensus among investors is that the ‘No' vote is the beginning of the end for Greece, and that Grexit is on the horizon.
Tsipras said the power of a 'No' vote would give him a bargaining chip during bailout negotiations and may help sway the nation's creditors to relax some of their bailout requirements. While that may be true, EU government officials' patience is running thin for Tsipras and most don't trust that he will actually implement the reforms outlined in the nation's bailout plans regardless of what is agreed to.
In Greece, the referendum vote was widely celebrated as voters gathered in the streets to demonstrate their support for Tsipras. Around the world, the reaction was sharply different as many began to worry about how a Grexit would effect global markets.
Many international investors say it will be up to the European Central Bank to mitigate this crisis. The bank will have to decide whether or not it will continue funding Greek banks or leave the country to run out of cash. On July 20, Greece is due to repay a €3.5 billion bond and will need additional bailout funding in order to pay it.
In the coming days, the bank is likely to evaluate the progress between Tsipras and the nation's creditors in order to determine whether or not support should be given to Greece's financial system. If the two sides are still at odds as the repayment date approaches, many expect that the bank will eventually stop providing liquidity and that Greece will be forced to leave the currency union.
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