It looks more likely than ever that Greece will exit the euro zone, though however "voluntarily" it does so remains to be seen. The process could take considerable time following the referendum on Sunday in which 61.3 per cent of voters rejected an austerity package proposed by the country's creditors. Analysts at Tisco Securities caution that the "no" vote won't automatically lead to the "Grexit", as it's been dubbed. Instead they expect Greece to try and renegotiate its debt, especially ahead of a payment due on July 20 of 3.5 billion euro (S$5.2 billion) to the European Central Bank.
"You made a very brave choice," Prime Minister Alexis Tsipras told voters in a television address. "The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution."
Without further progress, Greece is facing its second debt default in a month, but many economists are calling for creditors in the euro zone, the US, Britain, Japan and various other financial institutions that have invested in Greek bonds to give Athens more time. They are advised to provide for greater "impairment loss" to stave off the risk of default and thus avoid a "debt haircut".
Tsipras has asked that 30 per cent of the debt be trimmed and for a 20-year grace period to repay the remainder. There are sceptics, however, who believe Greece will press for a more substantial haircut - it previously asked for fully half of its debt to be forgiven.
According to a Reuters assessment, Sunday's vote leaves Greece in uncharted waters - risking a bank collapse that could force it out of the euro. Without more emergency funding from the European Central Bank, its own banks could run out of cash within days, following a week of rising tension after they stayed shut and cash machines ran dry. Forced to abandon the euro, the government would have to revive the drachma, printing fresh notes in order to cover citizens' pensions and wages.
At the advent of the euro in 2001, it was worth 340.75 drachma. Gross Domestic Product was about half last year's US$237.6 billion (S$321 billion). But a return to the drachma would cause chaos now that all bills are paid in euro, and investment in financial and physical assets would be curtailed.
It remains to be seen how domestic spending might buoy the economy in the short term. Greece now owes about 200 billion euro to banks elsewhere in Europe, and if they're not repaid, they face troubles of their own. Worse, a Grexit would renew fears that other weak economies in the zone might balk at tough repayment rules.
So it was no surprise that European markets were in tailspin yesterday. Political leaders are to convene today to "discuss the state of play", as Eurogroup President Jeroen Dijsselbloem put it. Fresh initiatives from Athens are eagerly hoped for.
Affairs in Greece have prompted numerous policy meetings since 2011, when the first bailout package was approved. I believe there have been fewer meetings on the crisis in Ukraine, in which a country's very existence is at stake.
Italy's Finance Ministry was optimistic in its statement yesterday, saying the euro zone "is capable of coping with a crisis of confidence and possible speculative attacks", and some investors coolly concur. The euro weakened by 1.5 per cent against the US dollar in New York electronic trading right after the referendum result became known, but that soon narrowed to 1.2 per cent. And in Asian trade yesterday, the euro held up well.
Shinya Harui of Nomura Securities in Tokyo told AFP that the common currency was indeed holding solid as traders "assess the spill-over risks", though he predicted that the Grexit is 70 to 80 per cent likely to happen.
Thailand thus far is feeling little impact, given its small investment in Greek assets, but, in the event of a Grexit, the consequences would be immense should the euro's value against the dollar drop, since Thai exports run on dollars. Exporters would be smiling because Thai products would fetch more in dollars. At one point yesterday the baht weakened to 33.84 per dollar, but gained against the euro, to 37.29.
It all sounds quite promising for Thais planning trips to Europe as well. With the sole exception of Switzerland, they could be spending much less on food and hotels.
If Greece were to reintroduce the drachma, it would be painful for the country but a boon to its tourists. Out of the euro zone, Greece would no longer require a Shengen visa, instead stamping visitors' passports the way it used to and raking in 100 per cent of the foreign exchange.
Stock investors are crying foul over the crippling volatility this fiasco has caused, but in the end they'll just have to play with the cards they're dealt. If Greeks have had enough of the agony of austerity and if their creditors won't soften, there is nothing else to be done.
We can only adhere to Buddhism's middle path: hope for positive developments - and brace for the worst.