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Officially, today's referendum in Greece asks whether to accept a European bailout proposal from the European Commission, the European Central Bank, and the International Monetary Fund (collectively known as the Troika). It would require further Greek tax hikes and spending cuts. But that deal isn't even on the table — it expired on Tuesday — and it's far from clear what the Greek government will do as a result of the vote.
Because the Greek government has failed to clearly define what Greek people will vote about, the referendum has become a kind of political Rorschach test. The referendum could answer a number of different questions about Greece's economic future and the future of the Eurozone. Here are 5 of the biggest questions today's vote could help answer.
1) Does Greece need more austerity?
This is the way Greece's left-wing government likes to describe the referendum. In the view of the Greek government, a "yes" vote means that Greece accepts the additional spending cuts and tax increases Troika is demanding from Greece, while a "no" vote would be a vote for letting Greece choose its own destiny.
The problem is that by itself, rejecting the European offer wouldn't let Greece spend more or tax less. Quite the opposite: without emergency funds provided by the Troika, Greece will run out of money and forced to enact even steeper cuts to balance its budget.
On the other hand, if a no vote triggers a departure from the Eurozone, which many people expect, then the Greek government could finance more government spending by printing its own currency.
Many liberals, including Paul Krugman, believe that the Troika has been making a mistake by pushing for more and more austerity in return for bailout money. These arguments parallel the ones they made during the 2009 stimulus debate in the United States: that spending cuts are ultimately self-defeating, since they lead to lower economic activity and ultimately less tax revenue.
But many on the right have the opposite view. They point out that even after recent cuts, Greece has one of the most expensive pension systems in the Eurozone. They argue that making government benefits less generous will help Greece in the long run by leaving more room for private entrepreneurship. And they see pressure from German politicians as a way to get the Greeks to enact reforms they should be enacting anyway.
2) Should Greece stay in the Eurozone?
Greece's dire situation is partly due to the high debt the country had at the start of the 2008 financial crisis. But it's also due to a severe depression that has dragged on since that time. The economic slump has reduced the size of the Greek economy by around 30 percent, which is a big part of the reason Greece's debt-to-GDP ratio has grown from 107 percent in 2008 to 177 percent today.
If Greece had its own currency, the Greek central bank would engage in aggressive monetary easing to boost economic growth and bring down its 26 percent unemployment rate. But Greece shares a currency with countries like Germany and Austria that are currently enjoying low unemployment rates. So the European Central Bank hasn't done enough to support the Greek economy.
And this may not be a one-time problem. Economic downturns will happen at different times and with different severity in the various European countries. The euro's one-size-fits-all model will make it impossible to provide each European country with an optimal monetary policy.
Still, there are also some arguments for staying inside the Eurozone. The most obvious is that leaving the Eurozone would have some steep short-term costs. Greeks who owe euros to foreign creditors will suddenly find it a lot harder to pay off these debts with depreciated euros. And there would be months of chaos as the Greek authorities overhaul the nation's financial system and print new currency.
Second, it's possible that future crises won't be as bad as this one. "I think it's an open question on the extent to which this particular crisis was unusual," says Scott Sumner, a monetary policy expert at the Mercatus Center at George Mason University. Sumner argues that monetary policy in the Eurozone has been too tight across the board, with inflation falling well below the ECB's 2 percent inflation target. With better management, the ECB could have done more to boost the Greek economy without triggering substantial inflation in healthier economies.
Yet even if that's true, it's not necessarily an argument for staying in the euro, since the ECB could botch the next economic crisis as badly as it did this one.
3) Is political unity worth economic sacrifices?
Earlier this week, Vox's Zack Beauchamp made the argument that the case for the euro actually has nothing to do with economics. Rather, the euro is part of a broader plan to integrate Europe politically to help ensure there will never again be a war between major European powers such as France and Germany.
On this view, the economics of the euro are almost beside the point. Having French people and Germans use the same currency helps to create a sense of solidarity. And periodic economic crises could actually prove helpful in the long run, by convincing Europeans to accelerate the creation of institutions — like a continent-wide banking system and fiscal policy — that will help to prevent the kinds of problems the euro is creating today.
There are a couple of possible objections to this argument, however. One is that while a certain amount of economic pain might be worth the EU's political benefits, there has to be a limit. Greece's current political situation, with unemployment above 25 percent, is awful. The political benefits of European unity might just not be worth inflicting this degree of suffering on the Greek people.
Second, while the euro in general might be producing major political benefits, it's not clear that Greek membership is crucial to the currency's success. Five years of bailouts has produced bad blood between Greeks and Germans that will take years to overcome. And there's no reason to worry that an independent Greece would launch a war against its Northern neighbors. So letting Greece go might strengthen the European project more than going to heroic lengths to keep them in.
4) Should Europe move toward a super-state?
This question is related to the earlier one about political unity. Right now, Europe is neither an integrated nation nor a collection of sovereign countries. It's something in between, and that's causing a lot of problems.
Some people think the solution is to return the EU to being the free-trade club it was before the creation of the euro. But others, like Vox's Dylan Matthews, argue that Europe should move in the other direction and become a fully integrated country. If Greece votes yes, it has a chance to be part of such a project. If it votes no, it probably won't.
The challenge here is that Greece has very little control over whether a European superstate emerges. That would require buy-in from richer and larger European countries like France, Germany and Italy whose taxpayers would have to underwrite a continent-wide welfare state. So far, there's been little appetite for this. To the contrary, the strains of the last few years has made euroskeptical attitudes more common in many European countries.
5) Should the Syriza government be toppled?
As a practical matter, the Greek referendum will be a referendum on the country's government under the Syriza party and prime minister Alexis Tsipras. Tsipras and his ministers have been urging Greek voters to vote no, and his finance minister, Yanis Varoufakis, has vowed to resign if a majority votes yes.
So a yes vote will almost certainly mean that Tsipras's left-wing government falls. It could be replaced with a new government drawn from the current parliament. Or it could trigger snap elections, leading to more weeks of uncertainty as the country chooses its new leader.
The case against Syriza is simple: they swept into office demanding the impossible — an end to austerity without leaving the eurozone — and they haven't delivered. Moreover, Tsipras's erratic negotiating strategy has produced months of uncertainty and destroyed the goodwill of European partners. If Tsipras steps down, the Greeks will have a chance at a fresh start in their negotiations with the Troika, potentially allowing a deal on slightly more favorable terms that Tsipras would be able to secure.
Of course, leftist hardliners and those who think Greece should leave the Eurozone won't find any of this persuasive, since they don't believe a fair deal with the Troika was ever possible.
Also, toppling the Syriza government would likely bring to power one of Greece's other major parties: either the center-right New Democracy or the social democratic PASOK. But New Democracy led Greece's governing coalition from 2012 to 2015, and PASOK was in charge from 2009 to 2012. So they each share some of the blame for Greece's current predicament.
