Greece has given a resounding vote in the referendum to reject austerity measures imposed by the creditors in the terms and conditions for a bailout. The vote was 60-40 in favour of the ‘No’ side. The massive vote is a setback to the Eurozone and the dream project of a single currency which was implemented to remain permanent and strengthen the union. While the vote is a rejection for austerity, it is by no means an indicator that it is a vote to exit EU.
Many Greeks feel it is important to stay within the EU, but that does not mean they are ready to be coerced into accepting what the elite nations of Europe try to impose. Even Greece Prime Minister Alexis Tspiras, while acknowledging that the vote was a mandate for sustainable future, said it was by no means a mandate against Europe and warned that there would be no easy solutions. The outcome for millions of Greeks was an angry message to creditors that Greece can longer accept repeated rounds of austerity that, in five years, had left one in four without a job.
Way forward for Greece
With Greece having the highest public debt in the world, it puts a lot of onus on the government to reduce the debt levels and chart a path to bring down the debt. It would be difficult for Greece to achieve this without external support. This brings the ECB and IMF into play with whom Greece would have to negotiate to get a better deal and bring down the public debt. The Banks in Greece have been closed, along with capital controls in place, limiting withdrawals and the county is running out of cash. An emergency action will be needed to prevent the collapse of the banking system of Greece. But it is not certain if the ECB and the creditor governments of the Eurozone would be willing to sanction any assistance to salvage Greece’s financial system.
While Greece’s future in the EU remains uncertain, it would be interesting to see how the other member countries would approach in addressing the concerns of Greece after the referendum vote.
European divide
While the failure of the Euro is seen as a setback to the union, it is also seen as that of German Chancellor Angela Merkel’s biggest failure, with her overseeing the ruins of European Union. The European Council president has called for a meeting on July 7 to discuss the Greece situation and find the way forward. Ms Merkel is also scheduled to meet French President François Hollande on July 6 in Paris. German banking and trade circles have already started raising their voices saying the vote for no in the referendum means Greece should quit the euro. If the EU members decide not to supply further liquidity to Greece, then the banking system in Greece cannot stay afloat for long. Markets on July 6 morning in Asia witnessed a fall in their opening trading sessions, in anticipation of an imminent collapse of Greece.
What next?
Either way, the faultlines in Europe have never been as prominently visible as this crisis. One thing is certain that Europe is going to be different in the coming days, with critics of a single monetary union feeling vindicated that it is not an ideal system.
Highlights
- Referendum votes against austerity in favour of ‘No’ side 60-40
- Fear of Greece banking system collapsing if liquidity not infused soon
- Soaring unemployment levels in Greece with almost one in four unemployed
- Euro failure seen as the biggest setback to German Chancellor Angela Merkel
- Global markets fall in anticipation of imminent Greece collapse
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