3. What led to this point?
It's a long story that has its roots in the creation of the euro, five years of unsuccessful efforts to stem the burgeoning crisis and the diverging experiences of Greece and Germany, Europe's economic behemoth and decision maker. These two charts make those differences stark:
The first, uncollected tax receipts, shows that Germany has had almost no problem when it comes to taxpayers paying their bills due to the government, while Greece has had an unparalleled challenge. Germany has fewer outstanding tax debts than any other country in Europe, while Greece has more than any other. That difference not only helps Germany enjoy a far more fiscally sound position than Greece, but it offers a stark contrast between a disciplined government and one that historically has been hardly disciplined.
The second, unemployment, shows why Greece wants to take control of its own future. It is suffering the worst unemployment on the continent — worse than unemployment in the United States during the Great Depression — and even worse unemployment among its young workers. When they see that one in two young Greeks is unemployed — a problem that will cast a shadow on the Greek economy for generations — Greece's leaders want a different course.
More immediately, the referendum was called last weekend by Prime Minister Alexis Tsipras after negotiations with Europe broke down in Brussels. The European Commission, the European Central Bank and the International Monetary Fund — "the troika" — were giving Greece the money it needed to function and to, well, pay the troika back. The IMF, in particular, insisted that Greece cut its pensions by 1 percent of gross domestic product, and Greece responded that it was willing to cut them only half as much and make up the difference with higher taxes on businesses. When they couldn't come to an agreement, Tsipras called for the vote.
That led to not only a political escalation of the crisis — but an economic one. There has been a slow-motion bank run the past few months — a bank jog, really — that has picked up pace as it has appeared as if there wouldn't be a deal. That's because people were worried that Greece would be forced out of the common currency without one, and their old euros would get turned into new Greek drachmas, which wouldn't be worth anywhere near as much.
So when there wasn't a deal, Greece was forced to close its banks, limit ATM withdrawals to 60 euros a day and prevent people from moving their money abroad in a capitulation to this panic. Then, on Tuesday, Greece announced that it would default on a 1.5 billion euro payment to the IMF. That wasn't surprising. Greece doesn't have 1.5 billion euros. It doesn't have anything. It's broke.
For a moment it seemed talks might resume last week. Greece's government was making a last-minute request for a new bailout, and Europe was offering at least minor concessions. But then Germany's Merkel and other creditors made clear that they want to await the terms of the referendum, and the rhetoric coming from Syriza only heated up, making the referendum all but a certainty.