Greek referendum: Vindication for Tsipras but tough road ahead

The landslide decision of almost two-thirds of Greek voters to support their government in Sunday's referendum will leave prime minister Alexis Tsipras feeling vindicated about his strategy with the country's lenders and his belief that he can seek a new round of negotiations with them.

With the first official projections estimating that the No vote would exceed 60 per cent, the Greek leader will believe that Greeks have now “set a new course for all the peoples of Europe”, judging by the statements he made after casting his ballot in the surprise referendum that he called a week ago.

In his view, voters have sent a two-fold message: that Europe must now return to "its founding values of democracy and solidarity" and that Greece is determined "not only to remain in Europe but to live with dignity in Europe".

But, after the week-long referendum campaign that saw harsh words exchanged between Athens and a number of European capitals, Tsipras is now presented with the formidable political challenge of convincing his counterparts at EU level that a fresh start should be made, one that can bear fruit and produce rapid results.

In the run-up to the vote, many of his counterparts and Greece's creditors – that is, the European Commission, European Central Bank and the International Monetary Fund – indicated that they could no longer deal with Tsipras and his government.

Indeed, some openly called for the election to be followed by the creation of a government of national unity. In the light of last night’s results, in the unlikely scenario of any opposition parties joining Tsipras’s coalition government, it would be on the prime minister’s terms.

Among the many assurances that Tsipras dispensed during the frantic campaign was that he would be able to clinch a deal with the country's lenders within "48 hours". On Sunday night, the Greek government's chief negotiator said he believed a quick deal was possible. "We'll negotiate a solution which is economically viable," deputy foreign minister Euclid Tsakalotos told Star channel.

Greece’s position was now bolstered with “a new popular mandate” and a recently released IMF report that states that the country’s debt is unsustainable, he said.

Apart from the overall political challenge Tsipras faces in converting this new popular mandate into anything resembling trust with his European partners, he must also work to reopen the country’s banks, which remain closed following the imposition of capital controls last week.

Last week, Greek finance minister Yanis Varoufakis promised that the banks would reopen on Tuesday, but that can only happen if the ECB gives its approval, which is dependent on euro zone finance ministers approving a Greek application that the bank increase the emergency liquidity assistance level for Greek banks.

Any delay in resuming emergency funding for Greece’s banks would wreak further damage on the economy, which has already slipped back into recession. Tsipras will also be conscious of reaching a deal by July 20th, when Athens must meet a €3 billion debt repayment to the European Central Bank.

The absence of any deal between Greece and its creditors leaves open the possibility that Greece will head for the euro zone exit.

However, despite the hard talk from European leaders in the run-up to the referendum, the sheer size of the Greek No vote will make it extremely difficult for them to continue to play hardball with Tsipras.

With pre-referendum opinion polls showing the Yes and No camps neck and neck, few in Greece predicted such a strong No result. In Brussels and Frankfurt, there seemed little doubt that the Yes side would prevail.

A terrible uncertainty has hung over life in Greece in recent weeks, but the big question now is how Greece’s creditors will react. Will the Germans signal a willingness to make concessions? Will the European Central Bank allow the Greek banks to collapse? Is there a contingency plan to deal with the new political reality in Athens?

Delivering his reaction, a leading German conservative MP said a speedy resolution was not on the cards. "Tsipras has caused a disaster and must see how to pick up the pieces. There is no chance that a solution will be achieved within 48 hours," said Michael Fuchs, who has long had reservations about bailouts for Greece.

The news from Athens prompted Italy's foreign minister, Paolo Gentiloni, to call for efforts on agreement to be resume. "Now it is right to start trying for an agreement again, but there is no escape from the Greek labyrinth with a weak Europe that isn't growing," he tweeted.

On the other hand, an emboldened Tsipras may feel he has the firm authority to sign off on the austerity commitments that his government had proposed in return for a deal.