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Greek no vote may end in economic meltdown expert warns

06 Jul 2015


London Business School strategist says victory puts Tsipras in corner

michaeljacobides

Greece has voted to reject the terms of an international bailout. But victory in the referendum has put Mr Tsipras in a worse corner than before, a strategy expert from London Business School has warned.

Michael Jacobides, Associate Professor of Strategy and Entrepreneurship, London Business School, says the victory has left Tsipras facing a hostile crowd in Europe. 

“Yesterday’s referendum might have sparked a party in Syntagma square and Mr Tsipras might have felt like a victor, but this is probably going to be the last jubilation for a while. 

“The Greek prime minister opted for a referendum because he was put in a corner, and his left-wing MPs didn’t want to pass the measures. He preferred stunning and alienating his creditors and few remaining EU allies to confronting his party, unwittingly strengthening the cause of hawkish politicians such as Mr Schaueble. His victory in the referendum puts him in an even worse corner. With EU officials having made it clear that a “no” vote would be interpreted as a willingness to abandon the euro, and commitments made not to support Greek demands, he will be facing a hostile crowd in Europe.” 

Despite Mr Tsipras’ attempts to couch the vote as a “no” to the proposal but “yes” to the euro, Dr Jacobides expects European decision makers to take a much dimmer view. 

Speaking after the result last night on CNBC, Dr Jacobides warned that on the home front, the strong “no” vote will strengthen the radical wing of his party, which will make the agreement of a proposal even harder. “Yet”, he says, “Greece is starting to slide into economic chaos, and urgent action is needed.”

With many leaders in the EU now hostile, the chances of an agreement look slim.

Dr Jacobides says: “The question now is whether the hardliners in Europe will have their way in ousting Greece, or whether some agreement at this late hour can be found. With the hostility from many leaders in the EU, this looks like a difficult thing to do, and it is hard to see how the Syriza/Anel government would be able to both propose a plan acceptable to the creditors, and be entrusted by the EU to implement it.” 

Barring rapid political developments in Greece, a reversal of the dim mood in the EU and a bit of luck, Dr Jacobides believes the country could be faced with economic meltdown.