Greek ‘no’ sends shockwaves through Europe
The people of Greece have voted against a proposed bailout deal which would have required a deepening of austerity measures. Is this the right thing to do or a reckless gamble?
In the birthplace of democracy, voters yesterday participated in a democratic revolt. As the results came in from an unprecedented referendum, the people of Greece soundly rejected an offer from the country’s creditors which would have provided them with emergency funding to relieve the country’s economic emergency.
Around 60% of voters refused to accept proposals from the Troika – the European Union, the International Monetary Fund and the European Central Bank – which would have allowed Greece to meet some of its debt payments, pay its government workers and keep money within its banking system in the coming months. The conditions attached to the package, which required public sector cuts and tax rises to go beyond those already enforced since 2009, proved unpalatable for Greeks to accept even in a time of grave crisis.
The Greek government, led by the left-wing Syriza party, had called the referendum just nine days earlier and championed a vote of ‘OXI’ (no) against the proposals, to the consternation of the Troika and European leaders. The ‘OXI’ campaign cited very high levels of unemployment, poverty and debt in Greece as evidence that doing a deal would create more suffering.
The ‘No’ vote carries substantial risks. A new deal will now need to be reached quickly, but there is no indication so far that those who have lent Greece money are willing to write off the debts they are owed. The failure to reach a deal has already led Greece to default on a payment of debt which was due by Tuesday evening, severely damaging its credibility in international markets, and to impose capital controls, restricting people’s access to money. Without a new deal, Greece faces running out of money in the coming days. The chances of Greece leaving the euro – a move opposed by a substantial majority of Greeks and feared by finance ministers across Europe – now appear higher than ever before.
This is the decision which Jean-Claude Juncker, the president of the European Commission, referred to as ‘suicide’ last week. The Greek people have voted against the only people who can help them in an emergency which is the fault of people in their own country. Countries, like people, must play by the rules and pay back their debts, or nobody will trust them again.
But radical left-wingers are not the only people who see the result as a wake-up call; capitalist commentator Iain Martin is among those attacking Europe’s ‘disgraceful humiliation’ of Greece. The creditors should have known that Greece lacks the capacity to pay back the money they lent it. The banks may want their money back, but the Greek people need it more. Europe should hear their cry for help.
- Do you agree with Greece’s decision?
- Should referendums be used to decide on economic policy more often?
- Create a pamphlet either celebrating the result or explaining why you disagree with it.
- Write a briefing for the leaders of the Troika, outlining what they could do next and giving the advantages and disadvantages of each possible course of action. Finish by advising them what you think the best course of action is, and explaining why.
Some People Say...
“Today’s no is a big yes to a democratic Europe.”Greek Finance Minister Yanis Varoufakis
What do you think?
Q & A
- Does this affect politics in Britain?
- Politicians hostile to the EU are pleased; UKIP leader Nigel Farage has already praised the ‘courage’ of the Greek people for voting against the bloc which his party wants to leave. European politicians may also worry that some British voters, who are due to take part in the upcoming referendum on EU membership, are inspired to vote against them.
- What wider economic impact could it have?
- The increased likelihood of Greece leaving the euro may mean a great deal of uncertainty in markets over the coming weeks. This will particularly affect those who have invested in other vulnerable Eurozone countries, who may now be tempted to sell bonds at reduced prices. As global financial markets are interconnected, this could affect people around the world.
- Public sector cuts and tax rises
- Particularly controversial measures included reform of pensions among government workers and the proposal to raise VAT in tourist areas, which the Greek government said would substantially weaken one of the country’s key industries and therefore reduce its capacity to pay.
- Championed a vote of ‘OXI’ (no)
- Prime Minister Alexis Tsipras led rallies calling for a ‘No’ vote and Finance Minister Yanis Varoufakis said that he would resign if the country voted ‘yes’.
- Unemployment, poverty and debt
- Unemployment is now over 50% among young people. Some estimates suggest that over 40% of those in Greece are now in poverty. And the country is still believed to owe €340bn, nearly 200% of the money its entire economy generates in a year, despite the austerity it has already endured since 2009. Over €68bn is due to Germany, which is why German Chancellor Angela Merkel has been regarded as the most influential world leader in the crisis.
- Capital controls
- Banks have only been allowed to give out €60 per person per day and foreign transactions have been limited.