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EU, Eurozone Face 'Tough Test' After Greek Vote, Expert Says

Tim Buthe, associate professor of political science and public policy, examines Sunday's referendum

The next question in the ongoing Greek financial crisis is what Sunday's rejection of austerity measures will mean for Greece and Europe, economically and politically, said Tim Buthe, an associate professor of political science and public policy at Duke University.

"The victory of the 'no' vote in the Greek referendum shouldn't come as a big surprise," he said.

Buthe noted that because Greece is a fairly small country -- with a population of about 11 million, just slightly more than North Carolina – the impact on global financial market should be small.

"But for Greece, defaulting has important consequences," Buthe said. "For the foreseeable future, it means Greek governments will have little chance to borrow on international financial markets, or they will pay a very high risk premium."

If the Greek economy is not going to collapse completely, the government will need to introduce an alternative method of payment -- a new currency, he added.

"Having soundly rejected the consequences of the political commitments that it made when it adopted the Euro as its currency, Greece will almost certainly need to leave the Eurozone," Buthe said.

"And even if the Greek prime minister keeps telling Greek voters that the 'no' vote has nothing to do with the Euro, the Greek government will in fact have to introduce an alternative currency almost immediately since it doesn't have any Euros left to pay anybody with it. And the European Central Bank would be foolish to lend any more money to a government has no intent to ever pay it back."

Buthe, an expert on the EU and the politics of international economic relations, said the latest crisis will be a tough test for the European Union and the Eurozone. But, he noted,  for more than half a century the EU seems to have come out of every crisis stronger in the end.

"For Greece, the political implications of the referendum may be even greater than the economic ones," he said. "Having 'won' the referendum, the Greek government -- and its voters -- will now have to face the reality of financial commitments that are not balanced by inflows."