Greek financial crisis: How the country moves forward after the No vote

The jubilance expressed by the supporters of the No side in Greece's historic referendum may be short-lived, as the country faces the sobering realities of its precarious financial situation.

On Sunday, more than 61 per cent of Greeks voted against budget cuts that European creditors had proposed in return for rescue loans the country needs.

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Now, Greece still must deal with a financial crisis that includes a debt to Europe of over €320 billion, and the need, according to the IMF, of at least another €60 billion more for relief. 

A sign of compromise? 

Despite the strong mandate the results gave Greek Prime Minister Alexis Tsipras, who had urged his citizens to vote No, the Greek leader signalled he may be willing to compromise with the Europeans with the resignation of former finance minister Yanis Varoufakis. Varoufakis, an inflammatory figure, had suggested the European leaders were financial terrorists because of their demands. 

But first things first. The banks.

But the most immediate threat facing Greece is the insolvency of its banking system, which is near collapse. Basically, it's almost out of cash. This has meant closed branches, long lineups at ATMs and a daily rationing of €60 per person.

"The first thing they need to decide is whether they keep propping up the Greek banks while the European leaders negotiate Greece's debt," said Evan Dudley, an assistant professor at Queen's University School of Business.

"It's a tough decision because the European leaders and the European Central Bank have taken a tough stance up to the referendum. If they cave here and say they will support the banking system so we can promote further re-negotiations, then it kind of undermines that tough stand."

Some suggest that July 20 will be the day of reckoning, as that's the day Greece owes the ECB a €3.5 billion payment. It's at this point the ECB could cut off the flow of money, forcing Greece out of the eurozone.

On Monday, the ECB said it was keeping the level of emergency credit to Greek banks unchanged. But Ian Lee, an assistant professor at Carleton University's Sprott School of Business, said he believes the ECB will continue to give some money to Greece, while keeping it "on a very, very short leash."

"I think what they will probably do is keep the money trickling in just to keep the banks alive while the [European leaders] decide what the larger overall package is going to be."

Goodbye eurozone, hello drachma?

With the very real chance that Greece may abandon (or be pushed out of) the eurozone altogether, this would mean the return of its own currency. The No vote has put pressure on Greece to take control of its own money supply and going back to the drachma could solve some of those problems, Dudley said.

"They'd say, 'OK, we don't need the ECB, we'll meet all deposit requests, We can pay everything out in drachmas instead of euros, All the currency transactions in Greece could be rewritten in drachmas. At the end of the day, Greece would be in full control, monetarily, of what's going on in its country." he said.

But that would come with its own set of complications. Greek businesses reliant on imports would now deal with suppliers who wouldn't want to be paid in drachmas. Goods coming into the county would face huge inflationary price increases. And contracts between Greek businesses, based on euros, would have to be renegotiated.

"It would be very difficult and chaotic in the short run. In the long run it would probably be best," Dudley said.

Market impact

While the markets fell following the referendum vote, it wasn't nearly as dramatic as some had feared.

"The stock exchange will hurt for the next few days. It always goes down when there's bad news, uncertainty and right now there's a lot of uncertainty and bad news in Greece," Lee said. "Then they'll come back up when the world is not coming to an end. "

Europe prepared?

Europe is much better prepared than it was in 2012 when Greece was going to default, before a last-minute bailout package was agreed upon. In part, the country has been ring fenced, meaning that measures have been put in place to protect other countries from the possibility of financial contagion.

For example, Dudley said, the ECB has said it will not let the euro currency fall, at any cost, eliminating fears the currency could collapse

Little effect on Canada

The Canadian economy is pretty much isolated from the Greek economy, with neither country engaging in a lot of trade with the other.

However, Canadian importers of olive oil, sea salt, preserved vegetables and other delicacies from Greece say they've been stockpiling goods in their warehouses in anticipation that the economic turmoil overseas will get worse.