James Forsyth

Greece says No, will Germany now try and kick it out of the Euro?

Greece says No, will Germany now try and kick it out of the Euro?
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Greece has voted No in the referendum and resoundingly so. With more than 90 percent of the votes counted, No is leading 61% to 39%.

The result is a massive humiliation for Eurozone leaders who have spent the last few days telling the Greeks to vote Yes and warning them that this was really a referendum on whether the country should stay in the single currency or not. Tonight, Syriza have been making clear that the Greek government intends to remain within the Euro.

However, the German government is making clear that it is not interested in further negotiations with Athens or a new bailout deal. Sigmar Gabriel, the deputy chancellor, has said, “With the rejection of the eurozone’s rules of the game, which has been expressed in this majority ‘no’ vote, negotiations on further multibillion euro programs are scarcely conceivable.”

There are three reasons why Berlin won’t want to back down from this position. First, German public opinion is—like public opinion in a lot of Eurozone countries—hostile to sending more money to Greece. Politically, another bailout—let alone debt relief—would be hard to sell to German voters or pass through the German parliament. Second, the Germans fear that offering Syriza better terms would encourage more southern European countries to elect anti-austerity, left-wing parties in the hope of wrestling concessions out of the Eurozone and the European Central Bank. With elections in Spain later this year, the last thing they want to do, is to do anything that will boots Podemos.

Finally, the German government simply no longer trusts Syriza and the Greek government. It simply won’t believe any commitments that Tsipras makes now.

But there is no mechanism for kicking a country out of the Euro. This means that everyone is now watching Mario Draghi, the head of the European Central Bank. For if the ECB withdrew its emergency lending assistance to the Greek banks they would collapse and the only way that Athens could restart its financial system would be by printing its own currency. The European Central Bank, though, has tried very hard not to get dragged into the politics of the Eurozone. So, it is hard to imagine it taking such a dramatic step immediately.

Angela Merkel and François Hollande will meet tomorrow ahead of a Eurozone meeting on Tuesday. The ECB will, probably, not take any decisive step until after this meeting. But a Greek exit from the single currency has never been nearer than it is tonight.