On Sunday,
Greek citizens took to the polls in a controversial referendum asking them
whether they support a plan calling for continued economic austerity in
exchange for debt relief. Their answer—with more than 70 percent of the votes
counted—was a resounding “no.” The outcome means that next steps for
the nation, which has fallen into arrears with the IMF and imposed capital
controls to prevent a run on the banks, is largely uncertain. According to reports from Reuters, the country may next attempt to secure financing by
asking for more emergency funding from the European Central Bank.
The
referendum—which had asked Greeks to vote “yes” or “no” on a proposal from
Eurogroup leaders to extend financing to the deeply indebted country— was
called for by Greek Prime Minister Alexis Tsipras amid meetings of Eurozone
leaders trying to come up with a deal to allow the country to avoid default.
The call for the referendum effectively ended those discussions.
While Sunday’s
result won’t solve the many problems the country is facing, it at least
revealed which difficult path the people of Greece have chosen to take.
Opponents of
the most recent Eurogroup proposal felt that the austerity measures put
forth by the group’s leaders—which would have included tax hikes, pension cuts,
and reductions in government jobs—were overly harsh and punitive, and would
hurt Greeks more than help them. The proposal also didn’t include sufficient
provisions for writing down Greece’s debt—an omission that some critics,
including Finance Minister Yanis Varoufakis, believed would leave the country
in shambles for generations. Varoufakis said that he would “rather cut off
[his] arm” than sign a deal that extends or intensifies the country’s debt. He
had planned to quit if the country voted in favor of the deal.
Those hoping
for a “yes” vote contended that even painful economic terms accompanying a
financing extension were better than no plan at all—especially if default
eventually would mean leaving the euro. Tsipras had urged voters to say no to
the current proposal, and also intimated that if Greeks had voted yes, he would
have resigned. “If the Greek people want to have a humiliated prime minister,
there are a lot of them out there. It won’t be me," he said on Tuesday.
Eurogroup
leaders made their distaste for the referendum clear. During the final hours
before default (and directly after it), Sunday’s vote was cited as a hindrance to even considering new proposals from
Greece, which could have staved off a default or pulled the country out of
arrears quickly after the midnight deadline. On Wednesday, hours after the
country defaulted in its debt to the IMF, it seemed that Tsipras was keen on making the deal work, as a leaked letter hinted that he was willing to
concede to many of the economic conditions outlined in the Eurogroup’s plan.
Then Tsipras appeared on television and said that the referendum would continue
as planned.
The back and
forth added fuel to the fire for those who disagreed with the idea of a
referendum and criticized Tsipras’s choices. On the eve of the default, groups of protestors demanding that Greeks support the
proposal gathered in Athens. And in the days before the referendum, polls showed that Greeks were pretty evenly split when it came to how
they’d vote. That the “no” side garnered over 60 percent of the vote, then,
came as a surprise.
A “no” vote
means that Greece will remain in arrears to the IMF, and the question of what
to do about the future of the financial system—specifically whether or not
Greece will remain in the Eurozone—will need to be sorted out among Greece’s
leaders without help, or funding, from outside sources.
The rejection
of continued austerity also does not mean that Greece will automatically leave
the Eurozone—a scenario frequently referred to as a “Grexit.” As my colleague Kathy Gilsinan outlined earlier this week, there are many considerations that
include staying in the Eurozone, returning to the drachma, or some combination
of the two. A “yes” vote, in any case, would not have solved Greece’s problems:
The country’s debt is still massive at €271 billion, the economy is in shambles, and the unemployment rate
is staggering at more than 25 percent. Nothing will fix any of this quickly.
One thing is
clear: Greece’s future is decidedly undecided. And while Sunday’s result won’t
solve the many problems the country is facing, it at least revealed which
difficult path the people of Greece have chosen to take.
Source:http://www.theatlantic.com/business/archive/2015/07/greek-referendum-decision/397616/
Comments
The vote was just about continuing the
Austerity regimen required by the IMF and they said no. This IMF plan resulted
in 111,000 private business bankruptcies and -4% negative GDP outcomes. Greece
did begin to reduce pensions by 10% and they stopped age 45 pension
eligibility, but it was all too late. Too many Greeks were already either
receiving pensions. The IMF Austerity didn’t really work despite their low 2.5%
interest rate on the Bonds. There is no news about Greeks reforming their other
corrupt practices.
The next step Greece could take is to leave
the EU because of their regulations and stupidity or stay in the EU.
Norb Leahy, Dunwoody GA Tea Party Leader
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