Greece says no – but this isn’t over yet

I know it's Monday morning, but can you take a moment to answer a quick question for me? Here goes:

1. Do you want to repay our evil creditors who have humiliated our country and ground our economy into the dirt? In that case, tick the Yes' box.

2. Or do you want to hold off for a better deal (which they'll definitely, definitely offer us)? In that case, tick the No' box.

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That in effect, is the referendum question that the Greeks just answered. And I think you'll agree, that when you put it that way, it's no surprise that No' won by a landslide (more than 60% of Greeks opted for it).

In fact, it's a miracle that anyone in Greece voted Yes'

This is not a vote for Grexit

One thing you have to understand about the Greek referendum is that to the people of Greece this was categorically not a referendum on the euro.

By voting no', they have not chosen to return to the drachma. This is not a vote for Grexit'.

Instead, they've voted for exactly the same thing that they voted for when Syriza won the election.

They want austerity to stop. They want the troika' (the various European players plus the International Monetary Fund) to clear off. And they want to keep the euro.

You might not think that matters. They can say they want to have their cake, and eat it too. That doesn't mean they'll get it.

But in fact, it really, really does matter. Because as we keep saying this is all about the politics.

If Greece had voted to leave the eurozone, then life would have been simple for the rest of Europe. They could have agreed to respect the democratic will of the Greek people, waved goodbye, and then taken as hard or soft a line as they felt like on the whole matter of repaying their debts.

But instead, all that's happened is that the Greeks have dug their heels in. Their demands may or may not be reasonable or economically feasible. But that's not important.

In effect, they've delivered an ultimatum to Europe. Give us a better deal, or push us off the cliff. But we're not going to jump of our own accord.

There's no easy way out of this dilemma

As I noted last week, this puts the eurozone in a really difficult position. The European Central Bank (ECB) is keeping the Greek banking system afloat. If it pulls the plug, then that's the next significant step towards eurozone exit. (I'm not going to say that it's game over', because there are more heroic last-minute escapes in this story than in a 1950s black and white serial).

But who's going to give the go-ahead for that? Which eurozone politician wants to risk going down in history as the one who pulled the starting gun on the end of the European project?

As a rule of thumb I always assume that politicians will take the path of least resistance. Usually, you'd expect that to involve a deal with Greece.

Trouble is, the structure of the eurozone gets in the way. Because drat them all each country involved has its own set of voters to keep happy as well. And when a large majority of Germans reckon that Greece has been indulged enough, that makes it tricky to take what would otherwise be the easy route.

So what happens now?

The headline-drawing Greek finance minister, Yanis Varoufakis added to the drama this morning by resigning. He says it's because other eurogroup ministers are fed up with him. "I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday's referendum. And I shall wear the creditors' loathing with pride."

So the Greeks want to return to the negotiating table. And so far it looks as though there will be a meeting of eurozone finance ministers tomorrow. It does seem unlikely given the stakes that there will be any rapid conclusion.

But the next key deadline is 20 July. That's when Greece is due to repay €3.5bn to the ECB itself. If it defaults on that which it will without a deal then even the ECB might find it hard to justify continued support of Greek banks.

What it means for your money

So far this morning, markets are largely taking this no' vote on the chin. And as I've already said, the short-term impact of a Greek exit would probably be panic, but would probably be relatively contained.

The danger is what would come next. We wrote about this in the latest issue of MoneyWeek magazine get your first four issues free here if you don't already subscribe but one of the key things to watch for is what's happening to other eurozone area bond yields. That'll be the first sign that trouble is spreading beyond Greece.