Tsipras vows to go ahead with referendum and campaign for No - what next for Greece?

The No side's lead has narrowed since the bank closures on Monday. 

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When it emerged this morning that the Greek government had accepted the the bulk of the troika's conditions, the assumption was that the referendum scheduled for Sunday would be called off. But in a characteristically defiant TV address this afternoon, Alexis Tsipras dismissed this possibility. The Greek PM announced that the referendum would still go ahead and that he would campaign for a No vote. He again insisted that the vote was not on whether to remain the euro and that the hoped-for result would strengthen his hand in negotiations. "A popular verdict is much stronger than the will of a government," he declared.

It is far from clear what Greeks are voting on now (indeed, it never has been). The offer that was withdrawn after the referendum promise or the deal now being discussed? But for Syriza, "oxi" (the historically resonant Greek word for No) is now an act of symbolic defiance. 

The polls are pointing to a victory for the No side but its lead has narrowed to nine per cent since the bank closures on Monday. It is doubtful, however, after Tsipras's relentless brinkmanship, that the troika will respond by offering improved terms. Should Greece vote Yes, the government would have to resign and new elections would be held. But there is no guarantee that Syriza (which was elected with just 36.3 per cent of the vote in January) would not again be returned to power. 

Ahead of his emergency Budget next Wednesday, George Osborne, as in 2010, is pointing to the crisis as evidence of the dangers of easing up on austerity. But as economists rightly contend, it is a surfeit, not a dearth, of austerity that has immiserated Greece. Though one would not know it from Osborne’s statements, the country’s cyclically adjusted primary budget surplus (which assumes a normal level of economic activity and excludes debt interest payments) is the largest in Europe at 6 per cent of potential GDP. It is the absence of stimulus for a depressed economy that explains the overall shortfall in revenue. Greece, on this basis, has been more fiscally responsible than the UK government (which has failed to achieve a surplus of any kind). Indeed, had Osborne not reduced the pace of the cuts, the recovery that he lauds would have been weaker.

George Eaton is deputy editor of the New Statesman.