Monday, June 29, 2015

Greece to default by the silly referendum

The future of Greece in the Eurozone became pessimistic. In this matter, my estimation seemed too optimistic.

My past entry: Issue of Greece and eurozone

Greece has a massive amount of debt to International Monetary Fund and European Central Bank. It has to return 1.5 billion Euro at the end of June, and 3.5 billion in July. It is unlikely for Greece to be able to discharge the duty. Therefore, Greece has been negotiating with EU for suspension of the due of return.

Greece had submitted a bailout plan in which some austerity programs were described. There was a considerable discrepancy in the thoughts between Greece and EU. They were continuing to negotiate with each other, nonetheless.

Financial Times: Leaked: Creditors’ bailout plan for Greece sent to eurogroup

However, Alexis Tsipras, Prime Minister of Greece, made a decision to conduct a referendum whether to accept the bailout program international creditors had offered.

BBC: Greece debt crisis: Tsipras announces bailout referendum

Before this referendum, Tsipras will encourage the citizens to oppose the austerity. He won the seat of PM promising the termination of the painful austerity citizens had been encountering for these some years. The Greek parliament approved to the implementation of this referendum. It is likely that it will result in the opposition to accept the bailout.

The Guardian: Greek crisis: Parliament approves referendum, after bailout extension rejected - as it happened

This decision ignited the anger of EU and other creditors. Finally, the other 18 countries sharing the euro decided to reject the extension of the expiring bailout, without the consent of Greek financial minister.

Reuters: Euro zone readies for Greek default after Tsipras referendum call

Greece will face the default before the date of the referendum, as current estimation. One-third of ATMs is now dysfunctional due to massive withdrawal by people fearing the freeze of saving.

HuffPost: Greece Bank Run Empties Over A Third Of ATMs Of Cash

In my opinion, the idea of referendum Tsipras suggested is quite stupid. Even if the citizens decline the austerity, their voice is no use. International creditors will claim the immediate return of debt. The facts are that, Greece does not want austerity, and it does not want default, either.

I think Tsipras was too optimistic to handle this crisis. His concept against austerity attracted fascination of Greek people. However, his idea never applies to international society. It is his responsibility to explain to citizens that the current situation has been much more serious than he estimated.

If he fails, the EU will abandon Greece; it is the result.


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