
 
 Simon Dawson/Bloomberg 
 
 Greece is heading toward a major vote Sunday that will both shape the future of its economy and Europe's monetary union. It is a complicated story, and here at Wonkblog, we've tried to give you a clear sense of what's going on and what's next. 
 
 But Anil Kashyap of the University of Chicago Booth School of Business has released an excellent primer of his own that's worth a read. Kashyap wrote the piece last weekend, before Greece officially defaulted June 29 on a key payment to the International Monetary Fund, and the situation continues to evolve into the weekend. In an e-mail, Kashyap notes a few other important developments since his primer came out, including that some Greek officials have pledged to resign if Greeks vote Yes on the referendum; that creditors won't negotiate anymore until after the vote; and that a new IMF debt analysis sheds additional light on the grave situation facing Greece. 
 
 Read over the primer's 18 questions and answers--reprinted here--and come away far more knowledgeable about Greece's crisis. (We have lightly edited a few points, marked with *, to reflect updates since the original version was published.) 
 
 1) How did Greece get into such trouble? 
 
 Greece from the mid-1990s until last year was constantly spending more than it was collecting in tax revenues. For most of this time, the country’s initially reported numbers showed small differences that were subsequently found to have been much larger. The revisions tended to be most substantial right after elections when a new government would find that its predecessor was much more profligate than had been reported. Because of these deficits, the country borrowed to cover the shortfalls and its debt burden was steadily rising. 
 
 In the fall of 2009, a then newly elected government reported that the deficit for that year was going to be 13.6 percent of economic output and that the deficits in 2007 and 2006 were also larger than had been reported. From that point onward, the world began to wonder if Greece really could pay the debt that it had issued or needed to default. Its borrowing costs rose sharply and the country began looking for ways to reduce its required debt payments and end its borrowing addiction. 
 
 2) Wasn’t Greece already bailed out in 2010? 
 
 By the spring of 2010 the excessive debt problem became unbearable and there was open speculation that Greece would default. The country had done this on four occasions previously since 1800. Much of the government debt was owed to banks outside of Greece, with the largest amounts in France and Germany. So if Greece had stopped paying, the French and German banks would have suffered substantial losses. 
 
 Greece was lent new money in 2010, but as Karl Otto Pohl, former head of the German central bank observed, at the time much of that money was used to repay the obligations owned by the French and German banks. The new lending was advertised by the politicians across Europe as a rescue for Greece. But it was at least as much a deal to buy time for the banks and other owners of Greek debt to avoid a default. Greece did avoid default, but the support came with requirements designed to make sure that the country end its chronic deficit spending. 
 
 3) Why did that rescue fail? 
 
 To justify the new lending, the lenders had to be assured that the deficits would end and that the country would grow enough to be able to service its debt. In May of 2010, the International Monetary Fund (IMF), led at the time by Dominique Strauss Kahn, who had ambitions of running for the presidency of France, conducted an analysis to see if such a scenario was realistic. The report at the time concluded that if Greece undertook drastic reforms it could close its deficits and begin growing so that over time the debt (including the new lending that was being provided) would be manageable. 
 
 This analysis was later shown to be deeply flawed by the IMF itself. The Greeks did actually cut their deficits substantially, but many of the reforms that were supposed to support growth did not occur and the economy contracted substantially. So the debt, relative to the size of the economy, did not improve. Importantly, no debt was written off in 2010, even though many analysts, including some on the executive Board of the IMF, at the time believed that it was necessary and that the banks and other private sector owners of the debt should have taken some losses. 
 
 4) What is the troika (or the institutions) and what do they have to do with this? 
 
 The new lending in 2010 came from two sources, a fund that was raised from European governments and the IMF. The bailout fund was overseen by the finance ministers of these governments. The European Central Bank also provided support to Greece in two ways. First, it allowed banks in Greece (and everywhere else) to borrow from it by posting bonds guaranteed by Greece as the collateral. Second, it bought some Greek government bonds in the open market. So all three of these organizations were now exposed to losses in the event that Greece ever defaulted. As such, they had representatives that met regularly with the Greek government to make sure that the reforms were on track. Initially the three were called the troika. Subsequently, they have also been referred to as “the institutions." 
 
 5) Wasn’t Greece also bailed out in 2012? 
 
 By late 2010 it was already clear that the debt burden might prove to be unsustainable. So discussions began over reducing the debt. The Greek government was supposed to sell some assets to retire some of the debt. That never happened and as the recession continued it was clear that the 2010 plan was not going to be adequate. So in March 2012 a second bailout program with revised terms was undertaken. 
 
 The IMF lent additional money, but the main conditions that accompanied the funding were largely the same. Once again, the cornerstones of the plan continued to be steps to make tax collection more efficient, to reduce spending promises, and to undertake reforms to encourage hiring and business expansion that would support growth. It was not clear why this plan would be more successful than the first one. 
 
 The European Central Bank meanwhile became more deeply committed to stabilizing financial markets. ECB President Mario Draghi famously said in July 2012 that “within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” Draghi’s statement immediately led to a drop in borrowing costs for governments across Europe and the pressure on Greece temporarily subsided. 
 
 By continuing to allow banks everywhere to use Greek debt as collateral, the ECB also created conditions that supported the trading of Greek debt. By this time the French and German banks had shed their exposure to Greece so that they would no longer be directly harmed if there was a default. So the stealth rescue of the non-Greek banks was completed with little public attention and the narrative that all the problems were self-inflicted by the Greeks became more pronounced. 
 
 6) Why is Greece in trouble again now? 
 
 In the time since Draghi’s statement three important things happened in Greece. First, Greece made further substantial progress on closing its deficits. By late 2014, Greece was finally spending less than it was collecting, although the interest payments on debt meant there was still an overall deficit. So for the first time since Greece adopted the euro it had budget position that was solid. 
 
 Second, the economy contracted for two more years as the reforms failed to deliver higher growth. Certainly the higher tax collections and reduced government spending contributed to the weak performance, but the degree to which the planned reforms, if fully implemented, could 
 
 have offset that remains controversial. It is important to also recognize the massive collapse was 
 
 preceded by a very large debt-fueled boom. 
 
 Austerity notwithstanding, the economy seemed to have reached bottom and was finally beginning to recover in late 2014. A very interesting counterfactual scenario is to contemplate what would have happened if the political situation had allowed this progress to continue. 
 
 The third major development, however, was that the public lost confidence in the incumbent government and its lenders. Unemployment in Greece has remained above 25 percent for years and 
 
 was much higher for young people. So the citizens were fed up. Hence, in 2015 the public voted 
 
 for a new government that insisted on deviating from the past playbook. 
 
 The major party in the new coalition, Syriza, is often referred to a coalition of the radical left. In January 2015, newly elected Prime Minister Alexis Tsipras sought to reopen negotiations with Greece’s creditors. 
 
 7) What is the Greek government asking for? 
 
 The Tsipras government wanted three types of changes. First, it wanted to restore some of the spending cuts that had been enacted. Second, it wanted to reverse some of the revenue hikes that the past governments had instituted. These first two requests would have widened the deficit and also reorganized priorities within the budget. (In fact, once it became clear that Syriza was going to win the election, tax revenues began shrinking as the public stopped paying some unpopular taxes). 
 
 Finally, it wanted outright forgiveness of some of the debt that had accumulated. 
 
 Since taking office, Tsipras has been negotiating with the creditors over for a new set of agreements. The creditors have made some modest concessions but are largely insisting on a continuation of similar plans. 
 
 When he failed to secure these changes, Tsipras announced that he would have the Greek people vote on a referendum on July 6 over whether Greece would vote yes to accept the creditors latest offer or vote no to reject it. 
 
 8) Why do the institutions disagree with the government?* 
 
 There are two sources of objections that the creditors have with Tsipras’ requests. 
 
 First, and probably most importantly, countries such as Italy, Portugal, Spain, and Ireland, had all had to undertake similar types of adjustment as in Greece. None of them saw their economies collapse to the extent of Greece, but unemployment especially among the young is also high in all these countries. Hence, if there are substantial concessions to Greece, then these countries will insist upon getting similar treatment. The existing governments in these countries all realize that if electing a radical government in Greece is seen as being rewarded, then voters elsewhere will do the same. 
 
 The money needed to save Greece could easily be found. Greece is a small economy, so even though their debt is large when judged relative to Greece’s economy, it is small relative to the overall capacity in Europe. In contrast, the money needed to forgive debt in the other countries, especially Italy and Spain, is not affordable for Germany (and all the other Northern European countries that would have to foot the bill). 
 
 Second, even if there was some way that Greece could be helped without setting a precedent, the officials do not trust the Greeks to carry through with any plans. The fact that Prime Minister Tsipras is asking for a public referendum to accept a continuation of prior policies was the straw that broke the camel’s back. Tsipras is arguing that the public should reject the plans. The institutions doubt that he could reverse his position and suddenly begin taking steps which he has campaigned against for years. They also are infuriated that he believes his mandate to get better terms supersedes the ones that other elected governments had from their citizens that wanted no more bailouts. 
 
 Another consideration is that IMF, the ECB and the other European leaders believe that unlike before, if Greece defaults the spillovers can be managed. 
 
 9) Why was the IMF loan that came due June 29 so important?* 
 
 The IMF made loans in 2010 to Greece that no private lender would have been willing to make. It did so with the presumption that it would be first in line to be repaid subsequently. 
 
 For failing businesses in many countries, there is analogous arrangement where in a bankruptcy situation a judge can decide that a business is worth more if it can continue to operate with some new funding, than if it was closed and sold off immediately. In that case, the new funding gets highest priority for repayment (otherwise no one will lend) and a judge will make sure that is the case. For countries, enforcing this priority is a problem since there is no court or other authority that can compel a country to pay. 
 
 Greece did not pay the IMF the €1.55 billion that it was owed on Tuesday. Now that it has defaulted, Greece has become an international pariah. To preserve its own ability to operate in future crises, the IMF must insist on being repaid. If it ever accepts the idea that a country can default if things go south, then it will never get repaid in the future. So the IMF will continue to seek repayment, no matter how flawed the analysis that led to the lending in the first place. 
 
 Interestingly, Greece did make a small payment to the European bailout fund, so it will not be in default to that lender even if it does fall behind with the IMF. 
 
 10) What did the ECB decide last weekend and why did Greece close its banks?* 
 
 The ECB decided it could no longer keep accepting additional collateral from the Greek banks that was guaranteed by the Greek government. This means no more extraordinary lending will be extended. The ECB was worried that Greece might not honor the obligations and hence it could be left with collateral that would be insufficient to cover the loans it extended already. This is in keeping with Draghi’s promise of staying within the ECB mandate; lending when losses are expected would be clearly illegal. 
 
 However, the ECB has not completely cut off its support to Greece. The ECB could have recalled all of its loans, or demanded even more collateral for the existing loans. But for the Greek banks this removed the only viable option for obtaining more cash. They do not have assets that they can sell to come up with more cash. So without the ECB’s full support, they are in serious trouble. 
 
 Greece has closed the banks so that depositors cannot take out all of their money. There are now limits on how much depositors can get from ATMs and limits on wire transfers. So depositors are nervous and scared about what is going to happen. 
 
 11) What can Greece do to save its economy now? 
 
 Greece must either find a new lender, which seems very unlikely, or survive with very little credit for a while; Russia will not step in to offer support, since doing so would likely wind up with some of the resources transferred to other creditors and Russia has its own big fiscal problems. 
 
 If there is a no vote, Greece will likely stop payments on all debt. Being cut off from credit markets, it will now be forced to match its spending to the revenue it is receiving. To ease the burden, the government will likely distribute IOUs of some form to government employees, vendors and pensioners. It may even have to use IOUs to fund the referendum. 
 
 These IOUs will likely circulate as a form of money alongside the euro. People will strongly prefer euros to the IOUs, so the IOUs will trade at a discount. 
 
 Some people and businesses may resort to bartering. 
 
 12) Why not just bring back the drachma? 
 
 The public will have little confidence in the IOUs that the government issues. Probably even 
 
 less confidence if Greece opts to officially introduce a new currency. Reintroducing the drachma would be totally illegal under European law and form the basis for a law suit to force Greece out of the European Union (EU). As part of the EU, Greek citizens can travel freely and work anywhere within Europe. Greek goods are also allowed to be sold without being subject to tariffs. Expulsion from the EU would be devastating. 
 
 Issuing IOUs which are not officially touted as a currency is a better option for Greece for now. 
 
 13) Will the Greek crisis spread? 
 
 It depends largely on what citizens make of the impending chaos in Greece. If people believe that their governments also might default on debt, they could also try to get money out of the banks. Likewise, investors could refuse to buy newly issued debt. 
 
 The ECB is likely to be able to head off both these problems. It is already buying debt and can do more of that. It also can lend against the collateral guaranteed by these governments. The ECB can probably contain the immediate fallout. 
 
 The political contagion is much harder to assess. Perhaps if Greece emerges in better shape in the medium term, then other countries will follow. Tsipras was betting that this concern would be so powerful that Europe would never take this risk. 
 
 14) What is likely to happen next in Greece? 
 
 The outcome of the referendum now becomes critical. If the public votes “yes," then perhaps the existing government (likely reorganized) will be able to reopen the banks and conclude a deal. 
 
 But, if the public sides with Tsipras government, then there will be a very sharp recession over the next few months. Tax collection is likely to collapse. The Tsipras government is unlikely to survive the economic collapse. 
 
 If the post-Tsipras government opts to proceed with the default, then the next big unknown is how long before the economy stabilizes. At some point Greece will be a very attractive tourist destination, and its goods that are no longer priced in euros will be more competitive, so at some point the economy will begin to turn around. Whether this takes months or quarters will depend on many decisions that are difficult to forecast now. 
 
 15) What happens to the IMF if its loan is not repaid? 
 
 It will continue to pursue its claim against Greece. Greece will not be able to borrow internationally until it makes peace with the IMF. So the IMF will eventually be repaid. This could take years. 
 
 The IMF is likely to be criticized further for the recommendations it made, particularly in 2010. Perhaps it will be reformed to limit its discretion in lending. 
 
 Traditionally the head of the IMF has been a European. That is very likely to change since many countries believe that Greece was treated preferentially because it was a European country. 
 
 16) What happens to the ECB if Greece defaults? 
 
 The loans made to Greece are extended by the Greek central bank, which in turn borrows from 
 
 the ECB. So the ECB will have a large claim against the Greek central bank that is likely to turn into a significant loss. 
 
 17) Can the ECB survive if Greece defaults? 
 
 The ECB can definitely continue even if Greece defaults. The ECB has provisions set aside to cover some losses. It also is making lots of profits on the bonds it owns (that it pays for with money that pays no interest). So the Greek losses per se are not a problem. 
 
 A default by a larger country such as Italy or Spain would be very different. 
 
 18) What should have been done to avert this crisis?* 
 
 Greece should have defaulted in 2010. Its debt burden then was unsustainable and nothing since then has changed this. It is true that financial markets were much more jittery at that time, but the money that was raised to pay off the creditors in that bailout could have been diverted to support Greece and other weak countries. Once the bad rescue of 2010 was undertaken, it was inevitable that some form of debt relief was going to be necessary. 
 
 Imagine how different the political dynamics in Europe would have been if the German and 
 
 French banks had been explicitly bailed out. 
 
 (Editor's note: Not everyone agrees with this perspective, and many policymakers would argue Europe could not allow a default during such a fragile time in the markets. But it's a worthwhile perspective to consider, given where we are now.) ||||| Media playback is unsupported on your device Media caption "Nobody has the right to threaten to cut down Greece from its natural geographic body" - Alexis Tsipras 
 
 Greek PM Alexis Tsipras has called on voters to reject "blackmail" when they vote in a bailout referendum on Sunday. 
 
 In a TV address, he insisted Greece's EU membership was not at stake. He later told cheering supporters to vote "No" to "live with dignity in Europe". 
 
 There were scuffles with police as both sides held rallies in Athens. 
 
 A Greek court has rejected a challenge to the legality of the referendum, in which people will vote on the terms of further international loans. 
 
 It comes after tough talks with creditors, and EU leaders have warned that a "No" vote could see Greece leave the eurozone. 
 
 Greece's economy is already being squeezed after its bailout programme ran out on Tuesday. 
 
 Banks have been shut and limits imposed on cash withdrawals. 
 
 The head of Greece's banking association has warned that although the banks have enough funds until Monday, they will be dependent on the European Central Bank thereafter. 
 
 Desperate times 
 
 Image copyright AFP/Getty Images 
 
 It is a scene that speaks of suffering and exhaustion, and one that may well become the lasting image of the Greek debt crisis. 
 
 An elderly man, sitting on the ground outside a bank, was photographed crying on Friday morning. 
 
 The image, taken in Thessaloniki by AFP's Sakis Mitrolidis, was widely shared on social media as soon as it was published. 
 
 The man, whose name was not disclosed, was helped away soon after it was taken. 
 
 His story is not known, but those of plenty of other pensioners are. 
 
 Monthly pensions have gone down to an average of €833 ($924; £594) from an average of €1,350 in 2009, according to INE-GSEE, the institute behind Greece's biggest union. 
 
 Read more: Cost of crisis to pensioners 
 
 Claims by Greek politicians that a "No" vote will strengthen their hand in bailout negotiations have been rebuffed by European leaders. 
 
 Both EU Commission President Jean-Claude Juncker and Jeroen Dijsselbloem - head of the Eurogroup of finance ministers - have insisted a "No" vote will weaken the Greeks' position and that even a "Yes" vote will not mean a deal is easy to agree. 
 
 Several European officials have complained in strong terms about Greece's abrupt decision to hold a referendum on the terms of a bailout offer that they say is no longer on the table. 
 
 But in a ruling on Friday, Greece's top administrative court rejected an appeal lodged by two individuals who had argued that it was illegal to hold popular votes on fiscal matters. 
 
 Media playback is unsupported on your device Media caption Stefanaki Ioanna: "A yes vote will give Greece a chance" 
 
 Debt 'unsustainable' 
 
 Thousands of "Yes" and "No" supporters gathered in separate squares of central Athens on Friday, and police threw stun grenades in brief scuffles with "No" protesters. 
 
 Mr Tsipras urged Greeks, at a "No" rally later on Friday evening, to say a "proud 'No' to the ultimatums". 
 
 In his TV address, Mr Tsipras referred to an IMF report published on Thursday which said Greece would need an extra €50bn euros ($55bn; £36bn) over the next three years to stabilise its finances and repeated suggestions that Greece needed debt relief. 
 
 The recent negotiations were over the release of a final tranche of bailout funds of €7.2bn. 
 
 Greece's mountain of €323bn debt was "not sustainable", Mr Tsipras said. He said he had called for a 30% "haircut" off the debt and a 20-year grace period for the rest. 
 
 Mr Tsipras urged voters to reject the "sirens of scaremongering", but added that: "Whatever we choose... Come Monday we are all together." 
 
 Mr Tsipras faces vocal opposition at home - with opposition leader Antonis Samaras calling on "every Greek man and every Greek woman above and beyond parties" to vote "Yes", along with several deputies from Syriza's own coalition partner, the Independent Greeks. 
 
 Lenders' proposals: Key sticking points 
 
 VAT (sales tax): Alexis Tsipras accepts a new three-tier system, but wants to keep 30% discount on the Greek islands' VAT rates. Lenders want the islands' discounts scrapped 
 
 Pensions: Ekas top-up grant for some 200,000 poorer pensioners will be phased out by 2020 - as demanded by lenders. But Mr Tsipras says no to immediate Ekas cut for the wealthiest 20% of Ekas recipients 
 
 Defence: Mr Tsipras says reduce ceiling for military spending by €200m in 2016 and €400m in 2017. Lenders call for €400m reduction - no mention of €200m 
 
 Source: European Commission document, 26 Jun 15 (pdf) 
 
 Greek debt jargon explained 
 
 Tsipras and his Greek gamble 
 
 A poll published in Ethnos newspaper on Friday showed the two sides evenly split, with the "Yes" vote at 44.8% and the "No" vote at 43.4%. 
 
 But the same poll showed 74% in favour of staying in the euro, with just 15% choosing a return to a national currency. 
 
 The European Commission, the European Union's executive arm - one of the "troika" of creditors along with the International Monetary Fund and the European Central Bank - wants Athens to raise taxes and slash welfare spending to meet its debt obligations. 
 
 On Tuesday, the previous eurozone bailout expired, depriving Greece of access to billions of euros in funds, and Athens missed a €1.5bn repayment to the IMF. ||||| ATHENS, Greece (AP) — On a night filled with emotion and packed city squares, naysaying Greek Prime Minister Alexis Tsipras and his "yes" vote rivals made their final pitches at bailout referendum rallies, as polls showed the two sides in a dead heat. 
 
 A woman holds a banner reading, "No to the Troika, I support Greece" during a a pro Greece demonstration at the European Union office in Barcelona, Spain, Friday, July 3, 2015. A new opinion poll shows... (Associated Press) 
 
 A Greek Orthodox priest gives money to a man who begs for alms under a banner reading "No" referring to the upcoming referendum in the northern Greek port city of Thessaloniki, Friday, July 3, 2015. Greeks... (Associated Press) 
 
 Greece's Prime Minister Alexis Tsipras delivers a speech during a rally organized by supporters of the No vote at Syntagma square in Athens, Friday, July 3, 2015. A new opinion poll shows a dead heat... (Associated Press) 
 
 Demonstrators gather during a rally organized by supporters of the Yes vote in Athens, Friday, July 3, 2015. A new opinion poll shows a dead heat in Greece's referendum campaign with just two days to... (Associated Press) 
 
 Greece's Prime Minister Alexis Tsipras waves to the crowd after his speech at a rally organized by supporters of the No vote in Athens, Friday, July 3, 2015. A new opinion poll shows a dead heat in Greece's... (Associated Press) 
 
 People attend a rally organized by supporters of the No vote in Athens, Friday, July 3, 2015. A new opinion poll shows a dead heat in Greece's referendum campaign with just two days to go before Sunday's... (Associated Press) 
 
 Greece's Prime Minister Alexis Tsipras waves to the crowd after his a speech at a rally organized by supporters of the No vote in Athens, Friday, July 3, 2015. A new opinion poll shows a dead heat in... (Associated Press) 
 
 A demonstrator holds a Greek flag and another one reading ''Yes'' during a rally organized by supporters of the Yes vote in Athens, Friday, July 3, 2015. A new opinion poll shows a dead heat in Greece's... (Associated Press) 
 
 Elderly men chat in the northern Greek port city of Thessaloniki, Friday, July 3, 2015. Greeks will vote Sunday on whether to accept a proposal that creditors had made of specific reforms in exchange... (Associated Press) 
 
 A member of the Communist-affiliated PAME labor union shouts slogans at the police during an anti-austerity protest calling to "Vote NO" outside of the in central Athens, on Friday, July 3, 2015. Greece... (Associated Press) 
 
 A man on a wheel chair sells items in central Athens, Friday, July 3, 2015. Rival campaigns in Greece’s bailout referendum end Friday, with rallies planned in Athens for “Yes” and “No” supporters - at... (Associated Press) 
 
 People line up to withdraw money from a bank machine in central Athens, Friday, July 3, 2015. As Greek banks and markets remain closed Friday for a fifth day, rival campaigns scrambled to roll out their... (Associated Press) 
 
 People wait to be allowed into the national bank of Greece to withdraw a maximum of 120 euros ($134) for the week, in central Athens, Friday, July 3, 2015. As Greek banks and markets remain closed Friday... (Associated Press) 
 
 People wait to be allowed into a bank to withdraw a maximum of 120 euros ($134) for the week, in central Athens, Friday, July 3, 2015. As Greek banks and markets remain closed Friday for a fifth day,... (Associated Press) 
 
 People wait to be allowed into the national bank of Greece to withdraw a maximum of 120 euros ($134) for the week, in central Athens, Friday, July 3, 2015. As Greek banks and markets remain closed Friday... (Associated Press) 
 
 Men, one of them using a magnifying glass, look at newspapers displayed at a news stand in central Athens, Friday, July 3, 2015. Rival campaigns in Greece’s bailout referendum end Friday, with rallies... (Associated Press) 
 
 Demonstrators use umbrellas to protect from the rain during a rally organized by supporters of the No vote in the northern Greek port city of Thessaloniki, Friday, July 3, 2015. A new opinion poll shows... (Associated Press) 
 
 A man looks at newspapers displayed at a newsstand in central Athens, Friday, July 3, 2015. Rival campaigns in Greece’s bailout referendum end Friday, with rallies planned in Athens for “Yes” and “No”... (Associated Press) 
 
 A man begs as people wait to be allowed into a bank to withdraw a maximum of 120 euro ($134) for the week, in central Athens, Friday, July 3, 2015. As Greek banks and markets remain closed Friday for... (Associated Press) 
 
 An Associated Press TV producer edits the video of Greece's Prime Minister Alexis Tsipras televised address to the nation in Athens, Friday, July 3, 2015. Tsipras has called on voters to reject creditors'... (Associated Press) 
 
 People attend a rally organized by supporters of the No vote in Athens, Friday, July 3, 2015. A new opinion poll shows a dead heat in Greece's referendum campaign with just two days to go before Sunday's... (Associated Press) 
 
 A salesman serves fish to a client at a fish market in central Athens, Friday, July 3, 2015. Rival campaigns in Greece’s bailout referendum end Friday, with rallies planned in Athens for “Yes” and “No”... (Associated Press) 
 
 More than 40,000 people gathered at the two rallies, half a mile (800 meters) apart, before Sunday's vote on whether to accept creditors' proposals for more austerity in exchange for rescue loans, or reject the deal as a show of defiance against years of harsh economic austerity. 
 
 "This is not a protest. It is a celebration to overcome fear and blackmail," Tsipras told a crowd of 25,000 in front of parliament, who were chanting oxi, oxi— "no, no." 
 
 Meanwhile, police said about 17,000 people gathered outside the nearby Panathenian stadium for the "yes" rally, waving Greek and European Union flags and chanting "Greece, Europe, Democracy." 
 
 Rallies for both campaigns were also held in 10 other Greek cities Friday. 
 
 Tsipras is gambling the future of his five-month-old left wing government on Sunday's snap poll — insisting a "no" vote will strengthen his hand to negotiate a third bailout with better terms. 
 
 But the high-stakes standoff with lenders this week saw Greece default on debts, close banks to avoid their collapse, and lose access to billions of euros as an existing bailout deal expired. 
 
 At the "no" rally, Athens resident Maria Antiniou held a handmade sign, reading "oxi." 
 
 "We have to strengthen Tsipras. It's not his fault we are bankrupt," she said. 
 
 "He doesn't have the mandate to take tougher measures and now we are giving that to him. It's not true this is a vote on the euro. It's a vote to change course and stay in the euro, and Tsipras is our best hope," she said. 
 
 That is a message the "yes" voters refuse believe. 
 
 Evgenia Bouzala, a Greek born in Germany, said she was considering shutting down her olive oil export business because of the financial turmoil. 
 
 "I don't think we can keep going. Look at what happened in the last three days. Imagine if that lasts another six months," she said. 
 
 "A 'yes' vote would bring a caretaker government and that would probably be better ... We have to start over." 
 
 The drama remained high in the final hours of campaigning. 
 
 The country's top court stayed in session till the late afternoon before rejecting a petition to declare the referendum illegal, while party leaders, personalities, and church elders weighed in with impassioned pleas to vote "no" or "yes" on the airwaves and social media. 
 
 In a rare public declaration, 16 former armed forces leaders wrote an appeal to citizens to show "calm and national unity." 
 
 A series of polls published Friday at the end of a frantic weeklong campaign showed the two sides in a dead heat, with an incremental lead of the "yes" vote well within the margin of error. 
 
 But they showed an overwhelming majority of people — about 75 percent — want Greece to remain in the euro currency. 
 
 Much of the ambiguity arises from the complicated question on the ballot paper: 
 
 "Must the agreement plan submitted by the European Commission, the European Central Bank and the International Monetary Fund to the Eurogroup of 25 June, 2015, and comprised of two parts which make up their joint proposal, be accepted? The first document is titled 'reforms for the completion of the current program and beyond' and the second 'Preliminary debt sustainability analysis.'" 
 
 Voters are asked to check one of two boxes: "not approved/no" and — below it — "approved/yes." 
 
 "People don't even understand the question," Athens Mayor George Kaminis told supporters at the "yes" rally. 
 
 "We have been dragged into a pointless referendum that is dividing the people and hurting the country." 
 
 Greek Finance Minister Yanis Varoufakis told Ireland's RTE radio Friday that an agreement with creditors "is more or less done" and that the only issue left is debt relief. 
 
 But the head of the eurozone finance ministers' group, Jeroen Dijsselbloem, rejected the idea, pointing out that negotiations had been broken off. 
 
 "There are no new proposals from our side and, whatever happens, the future for Greece will be extremely tough," Dijsselbloem said. 
 
 "To get Greece back on track and the economy out of the slump, tough decisions will have to be taken and every politician that says that won't be the case following a 'no' vote is deceiving his population." 
 
 Germany's finance minister, Wolfgang Schaeuble told his country's Bild daily that any negotiations after the Greek vote "will take a while." 
 
 No campaigning is allowed the day before an election in Greece, so Friday's rallies would be the closing salvoes in the battle to persuade voters ahead of Sunday. 
 
 ___ 
 
 Online: Official referendum website http://www.referendum2015gov.gr/en/ 
 
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 Elena Becatoros and Costas Kantouris in Athens, Geir Moulson in Berlin and Michael Corder in The Hague, Netherlands, contributed to this report
– Greece's top court has declared that Sunday's referendum on a bailout is constitutional, meaning the vote with huge implications for all of Europe will proceed. The latest polls show a dead heat, reports AP, as leaders on both sides try to rally support—especially Prime Minister Alexis Tsipras, whose political life may be at stake. “I ask you to say no to ultimatums, blackmail, and fear-mongering,” he said in a TV address. “No to divisions, no to those who want to spread panic.” He sought to downplay the notion that a "no" vote could lead to Greece leaving the euro zone. Instead, he said, the referendum is about giving him more leverage to get a better deal from creditors. It's the only way Greece can "live with dignity in Europe," he said, per the BBC. The Washington Post has a primer on the financial reasons behind the vote, but a story in the New York Times casts it in more personal terms. It's largely become a referendum on Tsipras himself, and the story suggests that's why European leaders itching to get rid of him limited emergency funds to Greek banks this week. The move set off a panic among people scrambling for cash, and his popularity tumbled. “I don’t see how anybody can believe that the timing of this was coincidence,” says a US economist. “When you restrict the flow of cash enough to close the banks during the week of a referendum, this is a very deliberate move to scare people.” Tsipras initially said he would step down if the "yes" vote prevails, but he has since backed down from that position.