Watch CBSN Live

Greek voters faced with choosing the best of bad options

However Greeks vote in Sunday's national referendum on a European bailout, turmoil and uncertainty are sure to follow, experts warn.

At issue are government spending cuts that Greece's creditors -- the European Central Bank, International Monetary Fund and other eurozone members -- are requiring in exchange for unfreezing tens of billions of dollars in financial assistance for the cash-strapped country.

More broadly, the outcome could affect whether Greece remains in the currency union, even as its economy weakens under the effects of such "austerity" measures, or abandons the euro.

Pain in the streets in Greece as financial crisis unfolds

Tension ahead of the vote was palpable on Friday, with reports of clashes between youths and police in Athens near the site of rallies held by supporters and opponents of the bailout. Police used pepper spray to stop several dozen protesters from damaging property in front of parliament, according to The Associated Press. With banks still mostly closed in an effort to keep capital from flowing out of the country, Greeks also continue to cope with a 60-euro cap on cash withdrawals and limits on overseas transfers.

Relations between Greek and European officials are, if anything, even chillier.

"There are no new proposals from our side and, whatever happens, the future for Greece will be extremely tough," Jeroen Dijsselbloem, head of the eurozone finance ministers' group, told reporters on Friday.

In theory, a "yes" vote in the referendum should clear the way for bailout talks to resume. Yet even that is likely to come too late for Athens to avoid defaulting on a 3.5 billion euro ($3.9 billion) debt payment due to the European Central Bank on July 20, according to analysts with Societe Generale. The Greek government on Tuesday missed a $1.6 billion payment to the IMF.

Riot police throw a tear gas canister as demonstrators run to avoid it before a rally organized by bailout opponents in Athens, Friday, July 3, 2015. Thanassis Stavrakis, AP

With Greece's previous emergency funding package having expired on Tuesday, for procedural reasons the sides would have to hammer out a new bailout. That could take weeks, or longer. Such an agreement would also require approval by German lawmakers, a major hurdle given public resistance in Germany to easing Greece's debt burden.

Meanwhile, a "yes" vote does not deliver what many experts consider a requisite for any long-term solution in Greece -- a writedown of its debt.

"[I]n the absence of substantial debt relief, we think the crisis will not come to an end and Greece's continued membership of the currency union will remain in doubt," said John Higgins, chief markets economist with Capital Economics, said in a note.

Voting to accept the bailout would also almost certainly trigger a political crisis in Greece. Prime Minister Alexis Tsipris, who opposes the proposed terms of the agreement, has hinted that he will step down if the "yes" camp prevails. Greece's finance minister, Yanis Varoufakis, has said unequivocally that he will resign his post if voters embrace the bailout.

While voting to back the bailout would leave plenty of uncertainty, experts say that voting against it would amount to a final straw for European officials. Economists say the ECB, facing imminent default on its loans to Greece, would likely halt funding for Greek banks. That, in turn, could force Greece to leave the eurozone, which would make it the first country to exit the 19-member trading bloc.

For now, global investors appear fairly sanguine at the prospect of a "Grexit." Although yields for other indebted countries, notably Spain and Italy, rose this week following Greece's default to the IMF, they have since receded.

U.S. financial markets were closed Friday in observation of the July 4 holiday.

But that calm might not last if the same political currents that mobilized opposition to austerity in Greece were to flare in other countries in Europe's periphery.

"The political contagion is the most significant (though not immediate) risk," Societe Generale analysts said in a note. "Limiting this risk will require further steps towards a genuine monetary, fiscal and political union. Limiting this risk will require further steps towards a genuine monetary, fiscal and political union."

View CBS News In