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Greeks are being asked to vote on whether to accept a proposal by the country's creditors for more austerity to keep aid flowing.

Voters have received a clear message from the euro area: vote “Yes” in the July 5 bailout referendum. But Greece’s Syriza-led government is pushing the other way.

The Question:

The 68-word ballot question namechecks four international institutions and asks voters for their opinion on two highly technical documents that weren’t made public before the referendum was called. Here it is, translated into English:“Greek people are hereby asked to decide whether they accept a draft agreement document submitted by the European Commission, the European Central Bank and the International Monetary Fund, at the Eurogroup meeting held on on June 25 and which consists of two documents:

‘‘The first document is called Reforms for the Completion of the Current Program and Beyond and the second document is called Preliminary Debt Sustainability Analysis.

‘‘- Those citizens who reject the institutions’ proposal vote Not Approved / NO

‘‘- Those citizens who accept the institutions’ proposal vote Approved / YES.’’

Not everyone in Greece is finding the question easy to understand.Greeks Struggle to Understand What They're Voting About

What Happens Next?

With polls showing a tight result, the only thing certain about the referendum is the timing: polls are open from 7 a.m. to 7 p.m. and the result may be known before midnight. 

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Either way, what follows are emergency negotiations, the outcome deciding which side feels it has the upper hand.

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The following scenarios are based on conversations with officials working on how to handle the Greek crisis, along with investors and economists.

Scenario 1: “Yes” – Then a Third Bailout

If Greeks vote “Yes” a third bailout package could come together in a matter of weeks if all sides put their minds to it, although Greece might need to form a new government in the same period. Results from the referendum could be known within hours, and some politicians have raised the prospect of a national unity, pro-European government with parties that backed a “Yes” vote.

Euro-area officials would probably reconvene quickly to consider next steps. Once there’s a deal in principle, it’s even possible Greece could win disbursement of 3.3 billion euros ($3.7 billion) from central-bank profits on bond purchases – money that was set aside for the second bailout and then taken off the table on June 30.

Scenario 2: Greece Vote “No”

If voters heed Prime Minister Alexis Tsipras’s recommendation and reject the bailout terms, Greece wouldn’t leave the euro overnight. Instead, the country would face three or four weeks of increasing pressure to start printing its own money.

That’s because Greek banks might soon be unable to meet European Central Bankdemands for the collateral needed to keep access to Emergency Liquidity Assistance, and the Greek government would run out of cash to pay its bills and workers. At that point, it would be Greece's decision to back out of the currency bloc.

Does the ECB Then Withdraw Support Immediately?

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Not necessarily. The ECB probably won’t withdraw its support overnight. Instead, the institution’s bank supervision arm will decide how to value the government-backed assets held on Greek banks’ balance sheets. Meanwhile, the central bank’s monetary policy arm will consider whether to object to collateral that lenders post to gain ELA access from the Bank of Greece.

Then, the banks would face a call for new collateral and might come up short. Taken together, the supervisory and ELA review could show the Greek banks to be insolvent, and Greece wouldn’t have the means to use euros to prop them up again.

Greece also faces a series of financing hurdles, including bill refinancings and loan repayments. Things could come to a head on July 20 – if they haven’t already – when Greece needs to repay about 3.5 billion euros in bond redemptions for securities held by the ECB.

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How Will the Lawyers Handle It?

Once Greece restarted its own currency, the legal procedures would need to play catch-up. Any contracts signed in euros will be thrown into question. Some sort of legal procedure will then need to be found to get Greece out of the euro, or at least to suspend its membership.

As one way around the hurdle, euro-area finance ministers are considering whetherArticle 352 of the European Union’s founding treaties might offer some basis. That section, which provides for the extraordinary adoption of measures, can only be used by unanimity and working with the European Commission and European Parliament. 

What Would Happen When the Drachma Returns?

Any new currency would probably start off by posting a hefty discount to the euro.Analysts have said Greece’s citizens would see an initial 30 percent to 40 percent drop in their purchasing power should the nation replace the euro.

After introduction, its value could sink lower as prices rise at the same time and inflation picks up. If Greece is lucky, the new currency would reach an equilibrium after a few months, perhaps buoyed by savings, foreign-held euros and tourism spending.

It’s also possible the Greek economy could go into freefall. At that point, they might need another international bailout anyway, when things could look far worse.

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Greeks Head to Polls Divided on Vote to Chart New Courseby Nikos Chrysoloras Matthew Campbell July 4, 2015 — 10:10 PM ISTUpdated on July 5, 2015 — 1:31 PM ISTShare on Facebook Share on Twitter

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Greece’s Divided Voters Decide on Future Path

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Greeks are heading to the polls Sunday, evenly split on a referendum to chart a new course in their five-year economic crisis.

“Come Monday, Greece won’t be facing just massive economic problems; it will be a deeply divided country,” said Nikos Marantzidis, a pollster and professor of political science at the University of

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Macedonia in northern Greece. “If the economic situation deteriorates further, which it probably will, the divide will only run deeper.”

The vote on whether to endorse further budget cuts and tax increases in return for aid comes in the most trying circumstances Greeks have faced in the euro era. Banks are shut, commerce is grinding to a halt, and Prime Minister Alexis Tsipras and his supporters are isolated in the currency bloc.

Tsipras is urging a “no” vote on the terms demanded by creditors in exchange for a fresh bailout. European leaders have argued that only a “yes” vote will give Greeks a path out of economic misery.

Either outcome brings complications, amid suggestions by media and some policy makers that new capital may be required, perhaps by seizing deposits from savers, to shore up banks. Tsipras imposed capital controls a week ago to stem outflows of funds from lenders.

Banking Complications

“I am not aware of any plans to introduce haircuts to retail depositors of Greek banks,” Andrea Enria, chairman of the European Banking Authority, said Saturday. “EU legislation is in place to protect retail Greek depositors.”

The Athens Chamber of Commerce president estimates that the country has only about 500 million euros in cash reserves left in banks, meaning bank machines will be empty early next week without further funds from the European Central Bank. Lines at ATMs continued on Saturday, as citizens waited to withdraw 60 euros each, the daily maximum permitted under the measures.

The Frankfurt-based institution plans to start discussing whether to extend new funds to Greek banks on Monday, though it’s unclear how and if they could be granted after a “no” vote. Such a result would also make it harder for Greece to reach a new aid deal with creditors.

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A “yes” could force the ouster of the Tsipras government and fresh elections, a possibility to which Finance Minister Yanis Varoufakis alluded on Thursday. And a result so close it’s inconclusive -- a strong possibility based on current polls -- may only extend the current stalemate, which began when Tsipras called the surprise plebiscite on June 27.

Competing Demonstrations

Competing demonstrations took over central Athens on Friday night, forcing hotels and shops to pull down shutters and closing streets. Police estimated both Tsipras’s event, in Syntagma Square, and the counter-rally at the Panathenaic Stadium each drew more than 20,000.

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“On Sunday, we won’t simply be deciding to remain in Europe, we’ll be deciding to live with dignity in Europe,” Tsipras said from a stage in front of the Parliament building.

Casting his vote today in the town of Pilos, opposition leader and ex-prime minister Antonis Samaras urged his compatriots to “vote yes for Europe” in comments broadcast by Skai TV. On Friday he told the “yes” rally that rejecting the bailout would be seen by creditors as a rebuke of the euro itself and would keep banks closed longer. Four other former prime ministers have also urged a “yes” vote.

In or Out?

A poll commissioned by Bloomberg showed 43 percent of voters intend to reject the creditor proposals, while 42.5 percent will accept the conditions. The survey of 1,042 people conducted by the University of Macedonia had a margin of error of 3 percentage points.

Voting is open from 7 a.m. to 7 p.m. local time Sunday and the result should be known before midnight.

Financial markets suggest the firewalls built since the debt crisis broke out in Greece in 2010 will hold. Since dropping on Monday after capital controls were imposed by Tsipras, the benchmark Euro Stoxx 50 Index has gained, as have 10-year bonds in Italy, Portugal and Spain.

Whatever comes after the referendum, the clock is ticking for Greece. Varoufakis this week blamed creditors for forcing the banks to shut just days before the vote. He said the country needs to stop a policy of “extend and pretend,” where its crushing debt load is rolled over and ignored.

Tsipras on Friday said that the only way for Greece’s debt to become sustainable is for a so-called haircut of 30 percent on obligations and a 20-year grace period. The International Monetary Fund said in a report on Thursday the country needs 36 billion euros ($40 billion) from its European partners and better terms to stand on its own feet.

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“There won’t be any happy ending regardless of the outcome,” Sergio Marchionne, the chief executive officer of Fiat Chrysler Automobiles SA, told reporters in Turin. “It doesn’t matter if ‘no’ or ‘yes’ wins.”

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Greek Pollsters Forecast Narrow ‘No’ Win in Austerity Referendumby Nikos Chrysoloras Matthew Campbell Jenny Paris July 5, 2015 — 6:10 PM ISTUpdated on July 5, 2015 — 9:50 PM ISTShare on Facebook Share on Twitter

 

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Greeks Vote on Place in Euro as Banks Run Dry: The Process

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Greek pollsters are forecasting a narrow win for the “no” side, endorsed by Prime Minister Alexis Tsipras, in a referendum that risks pushing the country toward an exit from the euro zone.

Four informal surveys published as voting finished estimated the lead for “no” at about three percentage points. Polls closed at 7 p.m. local time on Sunday and the first official projections are due around 9 p.m.

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Tsipras had urged his compatriots to vote against further austerity after calling the vote only a little more than a week ago, arguing Greece could stay in the euro under better terms despite the result. Most European leaders characterized the referendum as a de facto decision on euro membership and a “yes” as an easier route out of economic misery.

“Many can ignore the will of a government, no one can ignore that of a people that take life in their own hands,” Tsipras said after casting his ballot in Athens. “We’re sending a message not only to stay, but to live with dignity in Europe.”

Defying Fear

Voting on whether to accept spending cuts and tax hikes in exchange for a new European bailout took place in the most difficult circumstances faced by Greece since the country joined the euro. Banks have been shuttered for a week due to capital controls imposed to stem outflows of cash, commerce has slowed to a crawl and pension payments are being rationed.

“My logic and fear tell me to vote ‘yes’. But I’m voting ‘no’ because I think that even a small rupture is worth the risk for a better future,” said Ourania, 32, a consultant for small businesses who was voting in northern Athens. She said she didn’t want to use her last name because the vote has caused family disputes. “I went to the ‘yes’ rally with my husband who is voting ‘yes’. There is a lot of tension within families right now,” she said.

Either verdict would bring complications. It’s unclear if and how the European Central Bank could extend a further lifeline to Greek lenders, whose cash reserves are nearly exhausted, after a “no” result. Such an outcome would also make it harder for Greece to reach a new aid deal with creditors.

More Limbo

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“Irrespective of the referendum outcome, it is unlikely that there is an immediate resolution to the crisis the next day,” Marco Stringa, an economist at Deutsche Bank AG in London, wrote in a research note before the polls closed. “A ‘yes’ vote would be significantly more likely to lead to a quicker agreement with the creditors, but not without risks. Ultimately, the economic emergency will remain a key catalyst.”

A “yes” could force the end of the Tsipras government and fresh elections, a possibility to which Finance Minister Yanis Varoufakis alluded on Thursday. A result so close that it’s inconclusive may only extend the current stalemate, which began when Tsipras called the surprise plebiscite on June 27.

Some Greeks are despairing of their country’s situation.

“This vote is a test of our collective IQ,” said Hara Nikolou, a retired biochemist who lives on the island of Serifos, before casting her “yes” vote. “If our society opts to turn this country into Balkan wasteland, I don’t want to continue living here.”

European leaders will have to spring into action as soon as a result is known, after a week in which negotiations with Greece were largely put on hold.

The ECB plans to meet on Monday to discuss extending further liquidity to Greek banks. ATMs will begin to run dry within hours of the referendum, National Bank of Greece chairman Louka Katseli said on Friday. Lines at ATMs are continuing as citizens wait to withdraw 60 euros each, the daily maximum currently permitted by the government.