The game of chicken is over. There is no stepping back from the promise of a referendum, and if there is a future ‘deal’, it won’t be with the current Greek government.

Greeks friends are asking all the “what-if” questions, trying to decide how to vote. They think in terms of what would be financially better. There is no simple answer, because the specific MoU was, and is, wrong about the social contract which can sustainably govern the Eurozone. It is not about the short-term financial impact of whatever comes next. If it had been just about that, Greece would have been bailed out on sustainable conditions a long time ago..

In calling a vote, the Greek government has already rejected the offer which was on the table. The vote therefore carries mostly signalling value, and long nights of debate in the corridors of power will ensue after either outcome. A Yes vote won’t get the old deal back, and a No vote won’t destroy all chances for a solution. Arguably, the opposite is the case.

The referendum is about politics, in a positive sense of the word: About how societies choose to govern themselves, and how the communities signal to themselves and their members where lies the responsibility, the opportunity, and the burden, both for the past and for the future. And the political impact of a No vote is thus:

Any new deal after a Yes vote would strip any Greek government of its sovereignty in the negotiations. If Greeks vote Yes, Europe will come back with an offer similar to the last one. A Yes vote, they will have pre-determined the outcome of any debate in Brussels. The Greek delegation will have no mandate to disagree on anything. It’s rather like signing a ‘peace’ treaty after an unconditional surrender. But any ‘new’ program will again be modeled on the past MoU, and will be unsustainable in the face of economic realities. Greece will eventually end up more sidelined, more financially broken, and more boxed into the hole of the scapegoat than it is even now. A No vote flags to fellow Greek citizens and to Europe that Greeks are ready to ‘own’ the problem, no matter what pain this may bring. This is the chance for Greeks to show that they are more grown-up than the rest of Europe. The politics of dependence, which both Greece and the EU have played, are unhealthy in terms of social cohesion and civic responsibility. Further loans with no debt relief can only lead to more dependence. The best thing to do when your rich uncle bemoans your dependence but only offers steps which make you more dependent still is to tell him you don’t need his money. It’ll be very painful financially, and really hurtful to your uncle, but it’s the best thing to do. Self-reliance makes you stronger over time, while dependence only makes you more dependent. The core of the sovereign debt problems anywhere is a polity in which solidarity has become too much of a one-way concept, where everyone thinks the state is the bigger uncle. Only a ‘no’ vote carries the signalling value that Greeks are ready to take the pain that is required to become a self-reliant society. and are ready to decide democratically on the very thing which the Eurozone is unable to get past its own voters: That solidarity works both ways, that everyone is ready for the hardship that ensues when society’s resources have to be diverted exclusively to the poorest of the poor and the majority pays instead of drawing benefits. At a time when Greece needs to reform its very social and political fabric to become sustainable, a mood of solidarity and ‘giving’ in the face of personal hardship will be their strongest weapon, truly legitimizing for the first time the prosecution of violators of the social contract. And it will show Europe where Europe’s own political deficits are. Greeks are going to take a lot of pain in either scenario, so which would you rather have? Pain administered from the outside allows a perpetuation of myths: the internal myth of Greek victimisation, and the external myth of Greeks as perpetrators who as for money and even then complain. Pain that is self-inflicted sends a totally different social and political signal: The discussion whether Greeks are the victims of the perpetrators changes to a dynamic where Greeks are seen to take matters into their own hands, accepting the short-term pain, and not accepting hand-outs which are insufficient and yet come with many political, financial, and social strings attached. It is healthier for Greece to deal with Greece’s problems, and the Eurozone to deal with the Eurozone’s problems: Greece will have done the Eurozone and itself a favor by not re-entering negotiations at all. Both need restructuring in their own way, and neither can successfully reform itself while blaming the other for its own predicament. Greece can and should still accept any help it gets from outside, but should neither ask for it nor offer favors in return. Europe will find a (good or bad) way to deal with the humanitarian crisis, but helping must not become a bargaining chip. Measures dictated from the outside do not lead to sustainable reforms. Only democratic consensus can do that. Greeks will not reform unless they own their reform agenda, and the Eurozone can’t reform when Greece-negotiations always offer a cheap scapegoat.

I don’t want to diminish the risks that come with defaulting: Social stability will be sorely tested when cash points and fuel stations are dry, deposits undergo a haircut, and the police and teachers don’t get paid. It will be extremely disruptive. But if the only way for a society to fix things sustainably is to fix them on its own terms, a No signals readiness for a domestically-driven reform agenda even if it comes at huge personal costs. This will empower a new government to tell the public that they have nothing to offer but blood, toil, tears and sweat, and get some reforms enacted and enforced. The alternative is a new deal from the big uncle, whose reform agenda will always be seen as an intrusion. This will never ever provide the popular backing which would make reforms last through bad times as well as good. The Eurozone is right not to trust Greeks’ commitment to the reforms, but this is so only because Greece has never had a chance to form a domestic consensus around these reforms.

Europe is opposed to the very idea of a referendum because it would set a precedent for other countries: Can voters decide which treaties are, and which are no longer acceptable, even if their country has signed up to them in the past? What made the Greek issue so important to the EU is that at heart it is a conflict between the idea of “treaties within the EU are forever” on the one hand and the democratic right of member states to change their relationship with this contractual nexus when it clearly isn’t working. There is no question in my mind (nor in the mind of most voters in the UK) which of the two ‘relationships’ between EU nations is the healthier and more sustainable one.

This is the grand debate which will not go away, with or without Greece. The Greek government tried to focus on this rather grand and abstract point while being dependent on the concrete drip-feed of perpetual debt roll-overs and with looming deadlines for a default. Simply wanting to change treaties when they are no longer financially advantageous, and/or using the threat of collateral damage to the Eurozone in case of default is not conducive to finding an amicable solution. It’s everyone’s fault for having left things that late.

The simple fact of the matter is that Greece is so far beyond financially redeemable with its current debt burden that it has to first cut the poisonous umbilical cord, default, and then try to re-negotiate relations with the EU. After a No vote we would find out pretty quickly whether there is a way to deal with insolvency within a currency union or not. Put simply, there will have to be a way, even if we left it to five past midnight to start looking for one.

[UPDATE, June 29: An article by the Nobel Laureate Joseph Stiglitz makes much the same points as my post. It is well worth a read. Similarly an article on Vox Europe]