Why Greeks Are Scratching Their Heads Over Vote

Normally referendum questions are pretty simple, as are the answers. You're handed a straightforward proposition, vote Yes or No and then the matter is settled.

The big problem with the Greek referendum is that neither the question nor the answer are simple in the slightest.

Let's start with the question itself. The ballot papers which Greeks will have to say No or Yes to (the order is decided by the government, which wants a no vote) contain an extraordinarily long question.

The condensed version of it goes as follows: "Do you agree with the bailout terms we were handed in Brussels on June 25?"

But even this is more complicated than at first it looks: the bailout terms were extraordinarily long and abstruse, with ten sections, each with multiple sub-sections and clauses, all in complicated economese.

Even assuming every Greek citizen would read and understand these terms (and bear in mind most economists I've spoken to haven't) there's another bigger issue: the bailout proposal itself is no longer valid, having been taken off the table and replaced with a new one a few days later.

Even that updated offer is no longer available since the bailout expired last Tuesday.

In the event of a Yes vote, it's not clear that the old bailout could be exhumed. In fact, the other European finance ministers have said that now it's expired Greece would have to seek a whole new, third bailout. That would take even more time to negotiate.

Nor are there particularly clear answers about what would happen in the event of a No vote. Some say it would mean Greece would have to leave the euro. Others (primarily the Greek government) say that this is hardly assured. In any case, it's not clear that leaving the euro would solve all of Greece's problems.

The straightforward economist's rationale is that it would be good news for the country since the new drachma would fall in value (perhaps as much as halving against the euro) which would make Greek goods cheaper overseas.

The problem is that Greece's economy isn't particularly focused on exports, which account for only 33% of GDP - one of the lowest levels in Europe.

Moreover, even if Greece left the euro and successfully managed to default on its debt (which it would never achieve since it would be pursued for as many pennies as possible in the courts) it still wouldn't have enough cash to run its economy.

That's what economists mean when they talk about the country having a "primary deficit" - a shortfall of tax revenues to pay for its state, even after debt interest payments are ignored.

Anyway, the likelihood is that Greece would have to write off some of its debt whether it votes Yes or No.

As I revealed on Tuesday, the IMF published a paper just before Athens called the referendum arguing that a major chunk (potentially over €50bn) should be written off.

That paper, which was subsequently published, has caused an almighty stir.

However it's another reminder that whether there's a yes or a no this weekend, there will still remain many more questions than answers here in Greece.