Greece to seek end of austerity, not euro membership

Significance

Greece's government and voters have delivered a punishing blow to euro-area policies. However, the underlying dilemmas remain unchanged: whether creditors will countenance debt relief, whether the Greek government can produce credible commitments on reform, and whether euro-area leaders can manage their domestic political constraints and divisions.

Impacts

• Without European assistance, Greece faces a period of economic hardship as funds dry up to pay public-sector salaries and pensions.
• Without ECB liquidity injections to keep the banks operational, they will require recapitalisation. A bail-in of depositors is possible.
• Otherwise, a raft of bankruptcies is expected among businesses unable to acquire operational financing.
• The referendum result will encourage anti-austerity eurosceptics elsewhere in the EU.