'Yes' or 'No' - Greeks choose between Scylla and Charybdis

Much like Odysseus faced with the mythological sea monsters Scylla and Charybdis, Greeks voting on an international bailout Sunday were forced to choose between two potentially hazardous scenarios.

Homer's hero had to choose between losing a few sailors from his ship to a six-headed sea monster, or having his whole ship sucked into a whirlpool and destroyed.

For Greek voters the dangers are less certain, ranging from a possible fall of government to an exit from the euro.

Here are some ways the referendum results could play out:

- The 'Yes' scenario -

For the radical left Syriza government, which called on Greeks to vote 'No', a 'Yes' victory would be a rejection of their mandate.

But would it cause the government to fall?

Finance Minister Yanis Varoufakis has said 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, an early election would have to be called.

By law it would cannot be held sooner than 30 days and the outcome is anything but certain. "Tsipras could win again," said Henrik Enderlein, head of the Jacques Delors Institute 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 last week, has a number of other payments to make before another 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 has 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 waters. 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 it 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 banks. 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 solution could quickly lose its value, and high inflation could sweep the economy, pushing 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.