Greece's Bailout Referendum Boils Down To: Yes Or No

Jul 3, 2015
Originally published on July 3, 2015 7:01 am
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DAVID GREENE, HOST:

There is a lot on the line this Sunday when people in Greece go to the polls. They are essentially deciding their country's future in the European economy. Voters have to decide whether to support a complex plan to tackle Greece's massive debt. There are only two choices on the ballot - yes or no - and the problem for Greeks is that both options seem really bad. Jacob Goldstein from our Planet Money team reports.

JACOB GOLDSTEIN, BYLINE: Here's the short version of the question Greek voters will be answering. Should Greece keep doing what the Europeans want - more spending cuts, more tax increases - or not? A yes vote would be a vote for the status quo, which has not been good. Greece has been going through its own Great Depression. Retirees have seen their pensions cut. Unemployment is at 25 percent. Dmitrios Tzeranis is an engineer in Athens, and he says he sees the suffering all around him.

DMITRIOS TZERANIS: I see people looking for food in garbage trucks. Sometimes you feel that these people - 10 years ago they had a normal life or five years ago they had a normal life, and then suddenly the economy collapsed, and many people lost their job or lost their family. And the state did not enough to help them.

GOLDSTEIN: A yes vote, sticking with the European plan, could mean more of that. David Blanchflower, an economist at Dartmouth, says things could get even worse.

DAVID BLANCHFLOWER: Pensions fall. Tax rates rise. The firms that exist now start to close. The unemployment rate rises further. Output drops further than it's done before, and we clearly now have entered the death spiral.

GOLDSTEIN: From David Blanchflower, yes vote equals death spiral. So, what about a no vote? What about rejecting the European plan? That could mean Greece would leave the European currency altogether - leave the euro, go back to its old currency, the drachma. Blanchflower and other economists say that could be good. It could make it cheaper to foreign tourists to visit Greece and more tourism would be great for Greece's economy, or maybe not.

JACOB KIRKEGAARD: If they try to implement a new drachma, I think they will fail.

GOLDSTEIN: This is Jacob Kirkegaard, an economist with the Peterson Institute. Kirkegaard says last year, under the European plan, Greece's economy actually did start growing again. The country could stay on the euro and get back to that, he says, but if Greeks vote no - if they try to go back to the drachma - that won't happen.

KIRKEGAARD: They will not have the administrative capacity and the political credibility to successfully introduce a new currency.

GOLDSTEIN: When countries try to introduce new currencies in bad times, it can end in complete economic collapse. In other words, Kirkegaard says, Greece could wind up with a failed, worthless drachma and be locked out of the eurozone.

KIRKEGAARD: It is the worst of all worlds, unfortunately.

GOLDSTEIN: So, when Greek citizens step into the voting booth on Sunday, those will be there options - a yes vote...

BLANCHFLOWER: The death spiral.

GOLDSTEIN: ...Or a no vote.

KIRKEGAARD: The worst of all worlds.

GOLDSTEIN: I called a few people in Greece this week to see what they thought about all this. They said that, for them, the vote is about more than economics. Dmitrios Tzeranis, the engineer in Athens, said he's voting on where Greece sits in the world.

TZERANIS: I don't see any future for the country outside Europe. We live in a dangerous neighborhood.

GOLDSTEIN: So, does that mean that, to you, voting no in the referendum is like voting no to Europe?

TZERANIS: Yes, absolutely. I believe that.

GOLDSTEIN: Several people I spoke with this week agreed. They felt like they were voting on Greece's future inside or outside of Europe. Tzeranis said he plans to vote yes in the referendum. The others I spoke with said they weren't sure how they'd vote. Jacob Goldstein, NPR News. Transcript provided by NPR, Copyright NPR.