Pro-Europe protesters attend a 'Yes' rally in central Athens
Athens - AFP
What will happen after Greeks vote in the Sunday referendum on the terms of an international bailout? How will the country's creditors react? What options would the government have? Here are some ways that the crisis might develop.
The 'Yes' scenario
For the radical left Syriza government, which called on Greek's to vote 'No', a 'Yes' victory would be a rejection of their mandate by voters. But would it cause the government to fall? Finance Minister Yanis Varoufakis has clearly indicated he would resign if the 'Yes' vote wins. However Prime Minister Alexis Tsipras has not said clearly what he would do.
If the government falls, two possibilities exist. The first is to form a national unity government based on the current parliament. This would be difficult given the extreme differences between the conservative opposition and Syriza.
Failing that option, early elections would have to be called. Those could happen no sooner than in 30 days. And the outcome is anything but certain. "Tsipras could win again" said Henrik Enderlein, head of the Jacques Delors Institut in Berlin.
For Greece, which has imposed capital controls because banks are short of liquidity, any extended period of uncertainty would be extremely difficult to manage. Athens, which did not repay 1.5 billion euros ($1.7 billion) to the IMF, faces paying back some 2 billion euros of its T-bills on Friday. It has a number of smaller payments, before 3.5 billion euros come due to the ECB on July 20.
"Even if the 'Yes' vote wins, Greece won't be in the clear," said Agnes Benassy-Quere of the Paris School of Economics.
The ECB has until now been propping up Greek banks with Emergency Liquidity Assistance (ELA) loans. If Greece defaults on its payments, the ECB would find it difficult to continue providing them help, especially if no new bailout deal had been signed.
"It is an urgent situation, but politics works at a different pace than the economy," said Olivier Passet, an economist at the Xerfi consultancy.
He said getting final approval through the European parliaments that need to give their okay to any deal could take several weeks. The German Bundestag, which is now on summer recess, would need to be called back to give the government a negotiating mandate.
Passet said that "technical solutions need to be found in the interval" so the government can repay its debts and the economy kept afloat. He sees capital controls being lifted only in stages.
The 'No' scenario
Many analysts believe that a 'No' victory would send Greece into uncharted territory. With the Greek economy at risk of an upheaval, much depends on the reactions of the country's creditors.
"In case of a 'No', the situation will be more complicated," said Passet. "Tsipras will be strengthened, and the political crisis in Greece aggravated."
Tsipras has said a 'No' vote will strengthen Greece's hand in negotiations, but that is an open question whether Greece's creditors will reopen talks.
European Commission chief Jean-Claude Juncker seems to have excluded a new deal, having equated a 'No' vote to a "no to Europe".
Such a rupture would make it harder for the ECB to continue to prop up Greek bank. If it halts the aid, Greek banks will fail.
The Greek government could try to save banks by issuing a parallel currency to recapitalise them. Such IOUs could also be used to pay state workers, and quickly spread throughout the economy if access to euros stuck in bank accounts remains limited.
But this temporary script could quickly lose its value, and high inflation could sweep the economy. This would push more people into poverty.
Such a development would be tantamount to a euro exit, even if Greece doesn't declare its intention to abandon the euro. There is no mechanism to formally kick Greece out.
But would Europeans stand by and do nothing?
Vivien Pertusot at the French Institute of International Relations said that is highly unlikely given the potential economic and political damage to the euro.
Varoufakis said confidently Friday that "whether there is a 'Yes' or a 'No,' an agreement is in the offing."
While European officials disputed this, they have an interest to talk with Athens even in the event of a 'No' vote.
A euro exit would mean that Europe would have no hope of recovering the bailout cash it has lent Greece.
Official creditors now hold 80 percent of Greece's debt of over 300 billion euros.