Newly appointed Greek Finance Minister Euclid Tsakalotos looks on during a handover ceremony at the Finance Ministry in Athens on July 6, 2015. ANGELOS TZORTZINIS/AFP/Getty Images

So Greece has voted “no” in its referendum: 61.3 percent of voters have rejected the (now withdrawn) bailout proposals put forth last week by the troika creditors–the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB). Those proposals would have imposed further austerity on a country that has already experienced a crisis worse than the Great Depression.

What happens next is unclear. Greek Prime Minister Alexis Tsipras claims that the referendum has given him a “mandate to strengthen our negotiating position to seek a viable solution” with the troika. German Chancellor Angela Merkel and French President Francois Hollande met in Paris Monday to “evaluate the consequences of the referendum in Greece.” European Council President Donald Tusk has called an emergency summit to discuss the result. German Deputy Chancellor, Sigmar Gabriel, says that new negotiations between Greece and its creditors are “difficult to imagine” and has accused the Greek government of “saying ‘No’ to the Eurozone’s rules.”

What “rules” Greece has broken are not exactly clear: the treaty establishing European monetary union says nothing about either default or the need for member-states to accept austerity-inducing conditionality in exchange for troika financing. Nevertheless, pressure is mounting in Germany and elsewhere for Greece to be kicked out of the monetary union once and for all.

What is clear is that the underlying problems of European monetary union – macroeconomic divergences and lack of fiscal policy coordination among a group of countries bound by a single currency and a single monetary policy – have not gone away. Unless these problems are addressed, even a Grexit is unlikely to provide more than a temporary respite for the Eurozone. Without reforms that bring the Eurozone toward closer fiscal integration, restore the severely compromised independence of the European Central Bank, and eliminate the massive debt overhang plaguing the Eurozone’s southern periphery countries, the future of the single currency may be bleak and brief.

The Eurozone: three potentially fatal weaknesses

Why is this the case? The current episode has highlighted and magnified three potentially fatal weaknesses of the Eurozone, none of which bodes well for the long-term sustainability of the monetary union.

1. The ECB lacks independence

First, as Charles Wyplosz explains, the ECB’s independence has been severely compromised throughout the Euro crisis. The decline of ECB independence began when it agreed to violate the “no bailout clause” (Article 125 of the European Treaty) in 2010, at the behest of Eurozone member-states. It accelerated when opposition from Germany and others led the ECB to substantially delay the extraordinary monetary measures pursued by the U.S. Federal Reserve, the Bank of England, and others during the 2008-11 global crisis, thereby greatly prolonging stagnation and the lack of recovery in the Eurozone. It took three years for the ECB to announce the Outright Monetary Transactions program, due to opposition from some member-states. Similarly, the ECB only began its program of quantitative easing (QE) seven years after the Fed began its own QE program.

In addition, the ECB has, for most of the period since the onset of the euro crisis, undershot its inflation target of below or close to 2 percent by a wide margin. Given the severity of stagnation and unemployment in Greece and the other southern periphery member-states of the Eurozone, this is a clear indication that monetary policy in the ECB is influenced overwhelmingly by Germany and other surplus countries in the Eurozone, at the expense of the needs of the debtor countries in the southern periphery.

However, the most serious violation of ECB independence occurred this past week, when the ECB froze its emergency lending to Greek banks at current levels. It did this despite having declared these banks solvent in October 2014, during its Comprehensive Assessment of Eurozone banks, and despite the fact that providing liquidity to solvent banks experiencing liquidity problems is the very definition of a central bank’s role as lender of last resort. As Matthew Klein notes, a central point of the Comprehensive Assessment was to determine which European banks would have unrestricted access to ECB liquidity going forward should they need it. In walking back from this commitment, the ECB is effectively choosing to push Greece out of the Eurozone.

One must be absolutely clear about this: there are no formal rules that Greece is breaking by defaulting on its debt to the troika, and the euro is supposed to be a permanent and irrevocable currency union. And yet as banks of an EMU member-state stand on the edge of failure, the ECB is standing idly by and refusing to provide any additional last resort financing to banks it has already deemed solvent and which are on the brink of failure. To be sure, lending freely to insolvent banks raises serious moral hazard concerns. Refusing to lend further at this point, however, suggests that the ECB is caving to political pressure from European governments to cut off Greek banks and trigger Grexit.

All this has occurred despite the fact that ECB President Mario Draghi famously announced in 2012, that “within our mandate, the ECB is ready to do whatever it takes to preserve the euro.” What is now apparent is that “within our mandate” actually means “only if the Eurozone’s most powerful countries agree.”

What has been thought to be the world’s most independent central bank has instead turned out to be among the most dependent in the industrialized world. Recent research by Bill Clark and Vincent Arel-Bundock has shown that the U.S. Federal Reserve is a more political actor than previously acknowledged. Events in Europe since 2010 strongly suggest that the ECB is a similarly political entity.

2. Greece’s debt is unsustainable

Second, the IMF’s own analysis made clear last week that Greece’s debt is unsustainable, in spite of the massive 2012 debt reduction package–and even if Greece adopts and implements all of the conditions that its troika creditors demand. Coming to terms with this is essential for understanding what confronts Greece and the Eurozone. All of the arguing, bargaining, and negotiating of the past weeks over domestic policy reforms is pointless in the absence of a commitment to debt relief by Greece’s creditors.

A country which currently has an unemployment rate above 25 percent and a youth unemployment rate of nearly 50 percent, and which has already undertaken nearly unprecedented fiscal adjustment, is being asked by its fellow Eurozone member-states to endure further austerity and depression–in order to find itself in more or less the same position in 2030 that it is in today. Agreeing to such a semi-permanent economic depression would be economically insane – all the more so given the overwhelming evidence that austerity does not “work.” It is also politically impossible for a democratically elected government and borderline criminal in terms of the pain it would inflict on a generation of European citizens.

To be sure, Greece’s creditors are justifiably worried about moral hazard, fearing that debt relief for Greece would set a dangerous precedent for Spain, Portugal, Italy, and perhaps others. In that case, European leaders should pursue a coordinated Eurozone-wide debt relief plan – perhaps on the condition of commitment to greater fiscal union of some sort – along the lines of the Brady Plan that ultimately resolved the Latin American crisis in the 1980s.

What makes no sense is to refuse any debt relief, or to mandate more austerity in exchange for vague discussions about possible debt relief. Failure to offer debt relief means, for many states, that Eurozone membership will become synonymous with perpetual austerity and depression. If that is true, the Greeks are not going to be the only ones to leave in the coming years.

3. Eurozone membership isn’t permanent

Most ominously, it is now clear that European officials and national politicians in Eurozone member-states no longer view membership in the single currency as either permanent or irrevocable, as it was supposed to be under the Treaty on European Union. They have made it abundantly clear that there are red lines beyond which Greece (and presumably others) cannot cross if they are to remain within the monetary union.

For the last month, European officials, including Commission President Jean-Claude Juncker, have repeatedly discussed Grexit as a reasonable, if undesirable, possibility. This is a stunning development. The leader of the European Commission (and former head of the Eurogroup) has publicly broached the possibility that a Eurozone member-state can leave the single currency, despite the fact that the treaty underlying EMU established no legal mechanism allowing exit nor specified any conditions under which exit would be mandated.

European leaders, including Eurogroup chairman Jeroen Dijsselbloem, further raised the stakes this week by insisting that the Greek referendum was a poll not about the terms of another bailout package, but rather about Greece’s future in the Eurozone. Whether or not European leaders continue to adopt this stance in the wake of Greece’s referendum – and whether or not Grexit ultimately occurs – is now almost irrelevant. Membership in the monetary union has been revealed as conditional, even though the precise conditions have not (yet) been clearly delineated.

The end of the Eurozone as we know it?

In sum, the Eurozone currently lacks a truly independent central bank that is apparently unwilling to fulfill its role of lender of last resort or to target monetary policy to the needs of the monetary union as a whole, rather than to the interests of the most powerful countries. The monetary union also lacks credible mechanisms for coordinating national fiscal policies and restructuring unsustainable debts. In the absence of these institutions, the only solution put forth by European leaders to address debt problems in the Eurozone appears to be massive and indefinite austerity. Failing that, the only plausible alternative, as they have now publicly and repeatedly stated, is exit from the monetary union.

This is not a recipe for the euro’s long-term sustainability. As Karl Whelan has noted, the Eurozone very well may be able to survive a Grexit without triggering widespread contagion and igniting a “bank run” on Portugal, Spain, and Italy. But no one really knows for sure that this is the case. When financial difficulties and crises inevitably occur in the future, markets and governments will know that the “fixed and irrevocable” European monetary union is neither fixed nor irrevocable, and the probability that one or more countries will leave the Eurozone (or that the entire monetary union will collapse) will increase substantially.

If this is to be avoided, European leaders must push forward with reforms that not only put an end to Greece’s Great Depression but also strengthen the institutions of Eurozone governance. If they do not, we may look back at the current Greek tragedy as the beginning of the euro’s final act.

Mark Copelovitch is associate professor of political science and public affairs at the University of Wisconsin/Madison.

Read more about Greece and the euro at the Monkey Cage:

Nicholas Sambanis, Why the Greeks rejected Europe’s bailout 

Henry Farrell, Greece is less likely to get a deal after the referendum, but will get a better deal if it goes get one

Stathis Kalyvas: Why the Greek referendum is the referendum from hell

Amber Curtis, Joseph Jupille and David Leblang: Greece isn’t the first country to have a debt referendum. Does Iceland provide useful lessons?

Nikitas Konstantinidis: Has Greece always wanted Grexit?

Joshua Tucker: Why the Greek referendum is like a badly designed game of three dimensional chess

Melissa Schwartzberg: What ancient Athens can and can’t teach us about the Greek referendum