On July 5th, Greece held a referendum to decide whether the country should agree to continue with an austerity programme designed by its creditors. Since the last few months, regular negotiations have been held between the Syriza Govt in Greece and its international creditors including Germany and IMF. The Greek people decisively said NO to further austerity measures, with a 61% vote compared to 38% voters who said yes.
The talks so far between the two sides have not yielded any tangible results, with both sides maintaining their positions and no side willing to climb down. Greece missed a $ 1.7 billion payment to its creditors on June 30th this year. After that the Greek PM said he has called for a referendum on the issue and would take further action based on the results. Germany is the countrys biggest lender and it has pressed hard for more austerity measures to be embraced by the Greek. In fact Greece has been following strict austerity measures since the last five years devised by its creditors. In the last few years, the country was lead by a technocratic Govt and hence the lenders and the European Union found it easy to push its agenda. But the Socialist Syriza has made it clear that they are not interested in more austerity and hence the negotiations have hit a dead end.
Sundays vote will not help Greece avert its economic crisis. But even a yes vote wouldnt have helped it avert the crisis. In fact the no vote has at least helped the country avert a political crisis. A yes vote would have been curtains for the five month old Syriza Govt, in which case the lenders would have installed a Govt of their choice in Greece. No to austerity by the Greek people will also give more leverage to the Greek PM in negotiating a better deal for the country. It should be in place here to mention that Greece has been facing an acute financial and economic crisis since 2009, in the backdrop of a global economic meltdown. Though bigger economies like the USA, German, and China etc were able to come out of this recession, smaller and fringe countries like Greece, Spain, Italy and Ireland could not wriggle themselves out of the problem. The spiralling debt which in most of these cases is more than 100% of their GDP has not allowed these countries an economic recovery. The debilitating austerity measures that their lenders have prescribed have further worsened their economic conditions. Greece has had austerity measures in place since 2010 and in the last five years the country has seen unemployment among the youth over 50%. The creditors want Greece to cut down on its pension payments and increase taxes, which Greece finds difficult to implement given the grim look of their economy.
The future for Greece still looks uncertain. Much will depend on how its creditors including the IMF will further negotiate with it. Continued intransigence on the part of Germany may force Greek out of the Euro Zone which will force it to give up Euro as its currency. It is early days yet, but the Greek people have sent an unequivocal message against further austerity measures.
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