What did the EU members think, that Greeks would take their undeserved punishment until Angela Merkel and friends got bored? So now they’re in a panic. Good!

The euro and stock prices fell sharply in Asia on Monday after the Greeks had overwhelmingly rejected austerity measures demanded in return for bailout money, putting in doubt its continued place in the single currency.

U.S. equity futures dropped around 1.4 percent ESc1 while Japan’s Nikkei .N225 shares fell 1.4 percent and MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.5 percent.

Adding to the anxiety among investors, China’s stock market face a make-or-break week after a 30 percent plunge in the last three weeks forced officials to roll out an unprecedented series of steps at the weekend to prevent a full-blown market crash.

While early price actions have been choppy, dealers emphasized that markets were orderly with no signs of financial strain and expectations were high that the European Central Bank would step in early with a pledge of extra liquidity.

The Washington Post:

It remains unclear whether Tsipras’s gamble will pay. The European Council announced late Sunday that the continent’s leaders would convene an emergency summit Tuesday to discuss Greece. Finance ministers also will gather.

But Greece’s maverick finance minister, Yanis Varoufakis, will not be among them: He announced his resignation on his blog Monday morning, and suggested that Tsipras had asked him to step aside to appease European officials who had grown weary of his lectures about the destructive impact of austerity.

“I shall wear the creditors’ loathing with pride,” he wrote with typical bravado.

Ian Welsh explains:

It’s rarely clear in such situations if the people making decisions believe their own propaganda: did they think it was sustainable and wouldn’t lead to a crisis like this?  Did they know it would lead to a crisis and think the Greeks would sit still and take it (not completely unreasonable, actually, given how much pain people have accepted from plutocratic policies in the past.)

I don’t know, but I think it’s the winner’s curse: neoliberalism (and austerity is part of the neoliberal project), has been winning for so long that those who came of age and rose to power during it (essentially all our central bankers, technocrats and politicians) cannot imagine it would ever lose.  The look of incredulity is that of the three hundred pound bully when a 90 pound weakling doesn’t buckle.  (Again, this doesn’t mean that the technocrats don’t also think they’re doing the right thing morally.)

If I were them, and by that I mean “not me in their position, but them”, I would crush Greece flat and make an example of it.  If Greece comes out of this like Iceland, with a healthy economy in 3 years, then other populist movements (left or right) will receive proof that their policies can work. Democracy, as opposed to technocratic rule, will gain legitimacy, and so on.
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