A financial implosion seems unavoidable, for all the efforts the ECB might make to provide extra liquidity. A massive bank run will ensue unless credit institutions tightly close their front doors. How long can a country survive without access to money and credit? Only a few days at most. Should the stalemate continue, the economy would simply collapse.
The confidence vote bestowed on Tsipras’ government will fail to bolster his tenure in the coming negotiations with European leaders. Even if they try hard to find a way out, Tsipras has unwisely cornered himself into an untenable position. He cannot afford to indulge in extra concessions after the massive vote against the creditors’ offer. His counterparts cannot disburse further funds without a price. Any sort of compromise seems out of reach.
Yet European leaders should think twice before forcing a Grexit. Should Tsipras kick the can down that road, they might face unprecedented losses. An outright default might melt down almost half a trillion in arrears. Moreover, the collapse of the euro’s irreversible nature would create a credibility gap in the whole area, hitting countries with poor financial records hard. Should any economy come under stress, the soothing commitment Mr Draghi delivered back in 2012 of taking every necessary step for defending the common currency would no longer impress investors.
Tsipras has managed the crisis with an appalling lack of craftsmanship. However, European leaders and institutions should take little comfort from it. They must try to redress the situation by convincing the Greek government that huge reforms are the only way to prevent its country’s dire plight. The only plausible solution seems one of debt relief coupled with major structural overhauls. The trick lies in doing away with current austerity measures and focusing instead on a complete reshuffle of the Greek economy. Otherwise, a Grexit would inevitably happen, bringing huge damage to the eurozone as a whole.