The Greeks are voting today in a referendum called by their impetuous prime minister, Mr Alexis Tsipras.
I could spell the prime minister’s name without referring to any web site or newspaper, which shows how famous he has become in a short span of less than six months.
The referendum results are expected around 9 PM Greek time. But does the result matter ?
If it is a YES vote, the European Union could potentially heave a sigh of much desired relief, keep Greece in the European Union, extend the bailout in even more generous terms, and look forward to receiving a new government and a new prime minister in Greece.
If it is a NO vote, the Greeks would have emphatically chosen an anti-austerity approach towards solving what is their unsolvable economic conundrum. It would mean that, potentially, Greece could leave the European Union; it could also exit the Euro currency mechanism.
Both kinds of results could lead to unimaginable results.
Chaos for the Greeks or even more chaos.
For a country with just 11.1M people, Greece has a GDP of only USD 230B – I would have expected more, given that Greece has been part of the EU for many years, and is one of the most visited countries in the world. The GDP of Greece is just around 1.3% of the GDP of EU – could you believe that ? And, Greece borrowed much more than its GDP – its debt on date is standing at Euro 323B, almost 50% more than its GDP !
I am wondering why the European Central Bank and the IMF and other countries in the EU gave so much money to Greece ? On what basis ? Just to save a country ? It is easy to see that all these institutions erred in their judgement in assessing the capability of the Greek government to repay such heavy loans. And, the IMF, in its usual wrong way thought that it would be able to squeeze any government in the world once it has given a loan to mend its ways towards tough austerity measures – increase taxes, reduce subsidies, et al. Never worked anywhere in the world.
I am not supporting the Greek government as you would have read in my previous blog post a couple of weeks ago. I think it is the responsibility of the person who takes a loan to repay the loan, there is no doubt about that. However, we are talking about a whole country here who could have been potentially misled by the easy availability of credit, notwithstanding the bad ways that were the cause of the crisis in the first place.
There is still time to resolve the crisis, provided the Greek government accepts some of the tougher conditions of the bailout – there is no way the problem could be resolved by rejecting the bailout. Greece is using democracy for solving what is a severe economic crisis – I am not surprised given that Greece is the birthplace of democracy.
Let us see the referendum results tonight. European Union is facing their biggest challenge in a quarter century, and it would be a lesson in politics and economics to see how they finally handle and fix the crisis on their southern shores.
5th July 2015