It now looks to me like Greece has lost the wrestling match.

The other EU members are very sensitive to market reactions.

The question was whether the EU economy needed Greece, and the answer is now looking more and more like ‘no’.

Not a good position for Greece to find itself after posturing as if it is needed.

That is, Greece forced a test of that question and appears to have the leverage the possibility that they were needed gave them.

The euro did fall, which was extremely worrisome even though it did help exports. There is always the fear, particularly in Germany, of a currency collapse that brings inflation with it. At least so far, that hasn’t happened, with the euro holding about 5% above the lows and recovering from the initial knee jerk reaction from today’s referendum.

Real GDP forecasts remain positive, helped quite bit by the lower euro, and while high, unemployment has stabilized.

The camp claiming that Greece has been dragging down the entire EU economy is getting more support from the same data.

And so now while Greece isn’t being formally ousted, it will see it’s economy continue to deteriorate if it doesn’t agree to troika terms and return to ‘normal funding’ via securities sales at low rates under the ECB’s ‘do what it takes’ umbrella, and rejoin the rest of the members.

If the govt starts paying in IOU’s payments get made for a while, however they will be discounted ever more heavily with time, raising the cost of re entry to ‘normal’ funding, and the EU counts those as additions to deficit spending which could cause the terms of re entry to be that much steeper.

And any movement by Greece to use alternative funding will be taken as reason not to return Greece to ‘normal’ funding under the ECB umbrella.