Greece: The Broke Man of Europe

After Greece missed its deadline to repay the International Monetary Fund the money it owes, calling for a national referendum on 5 July over its creditors demands, anything can happen now. Athens has asked for easier bailout terms, and perhaps a revised deal could be worked out to restructure its huge debts, although this has been dismissed by the likes of Germany. Any concession by creditors—the European Commission, in particular—or even the appearance of it could undermine the credibility of those countries that anchor the Eurozone. It could possibly lead to other countries like Portugal and Spain asking for better loan terms of their own. Greece could opt out of the Eurozone, and EU leaders have warned that its obstinacy over the reform plan demanded of it would eventually amount to an exit, but this would plunge not just Greece into a nightmarish situation, but the EU itself, with its common currency, the euro, taking a hit.

In this atmosphere of international confusion and mounting chaos, all eyes will now turn to the referendum in which the country’s 11 million people will be asked whether Greece should say ‘yes’ or ‘no’ to what is demanded of it by way of bailout terms—which the Greek Prime Minister Alexis Tsipras has termed ‘unfair and harsh’. Other EU leaders have warned that it’s effectively a vote on whether to stay within or leave the Eurozone.

There are different views on the mess Europe finds itself in. Some have painted it as European blackmail against the free will of Greeks, where the EU, in the name of bailouts, is trying to force Greece to buckle under and accept punitive policies. Almost none of the huge amount of money loaned to Greece in the last five years has actually gone to the country. Most of it has gone to pay off its international loans. Some argue that the harsh austerity measures, requiring deep budget cuts, pension reforms and steep tax increases, thrust upon the country by its troika of creditors—the European Central Bank, EC and IMF—have plunged its economy deeper in recession. There has been over a 20 per cent decline in the country’s GDP in the last five years and a huge rise in unemployment. National assets have been sold, suicides and homelessness have increased, and its brightest minds have migrated to other countries. It is seeing the kind of poverty that Western countries haven’t for a long time. This may be what helped Tsipras’ leftist Syriza party achieve power earlier this year on an anti-austerity platform.

According to the other view, Greece cannot be exempt from criticism; it has binged for so long that it needs to get its expenses under control and let market rather than state forces lead a revival. Many economists say the crisis itself is evidence of the flawed concept of a common currency, where monetary union exists with little political union.

Poor tax collections, corruption and frauds in Greece have much to blame. The Greek government fudged its statistics and hid the truth of its precarious finances from its citizens as well as global investors and creditors. It was showered with cheap loans by European banks after it joined the EU’s euro monetary zone in 2001, and it was only eight years later, after the Great Recession descended and financial markets crashed, that the financial mess the country was in was revealed.

As essentials now disappear from supermarket shelves in Greece, daily ATM withdrawals get severely capped, and the lines outside closed banks get longer and longer, Greek citizens must decide the fate of their country and that of their engagement with the rest of Europe. Either alternative—a yes or no—is bound to be fraught with risk.

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