The Greek Tangle

Sunday’s referendum in Greece on whether its 11 million people wanted the government to accept the bailout deal offered by the country’s creditors two weeks ago was a clear rejection of the offer with 61 per cent of the people voting “No”. The proposed deal would have imposed greater austerity measures on the beleaguered country. The “No” vote could well mean that Greece will be out of the European Union and will hereafter have to deal with its political and economic problems on its own as an uttached and totally independent country in Europe. This might do a great deal for the tiol pride of Greeks, but will have serious repercussions on the economy and very survival of Greece in the coming years. For quite some years now, most West European countries have ceased to maintain their separate identities and have reaped the advantages of a common currency and a federation-like existence. So far, none of the member countries of the European Union has left the Union or been expelled from it. Over the years, almost all member countries of the European Union had got so used to being part of a greater entity that the isolated existence of earlier days had begun to be regarded as pointless and greatly disadvantageous.

The economic problems of Greece had begun a couple of decades ago and had got aggravated largely because Greece continued to provide misleading figures about its deficit to the European Union and its creditors. The problem was exacerbated by the fact that Greeks had flatly refused to abide by any austerity measures calculated to reduce the country’s debt and to bring its economy back on the rails. Today, this very attitude has resulted in Greek banks having no money and the government itself being quite clueless about how the country was going to be run in the coming weeks and months. True, the “No” vote in the referendum is being seen as a triumph for Prime Minister Alexis Tsipras, who had campaigned for that as a way to give him more bargaining power in organizing a new deal. But what new deal can he come up with in a situation where the outcome of the referendum could only lead to the strong possibility of all creditors walking away and leaving Greece to face default, fincial collapse and expulsion from the eurozone? In fact, one cannot rule out even the possibility of expulsion from the European Union. There are also legitimate fears that the outcome of the referendum might have aggravated the divide between the rich and the poor, the Left and the Right and the young and the old. Prime Minister Tsipras has been given time up to Sunday to come up with his new rescue plan. However, it seems very clear by now that he cannot possibly come up with any new plan that will have the approval of his creditors. And that is when his interl troubles may really gain momentum.

What is happening in Greece today is indeed saddening because for centuries Greece has been a sort of model for all European countries. The first flowering of democracy was in Greece, and Europe had much to learn from Greece about liberalism in governce. However, the Greece of today has turned its back on responsible governce and allowed an impossible fincial situation to develop by continuing to borrow from creditors even when the government knew that there was no means of repaying the reckless loans. Whatever plans Greek Prime Minister Alexix Tsipras may have up his sleeve will not satisfy major creditors like the IMF, and the German, French and other European banks considering that Greece’s borrowing already stands at 177 per cent of its GDP. So Tsipras is working on a tax amnesty deal for Greeks who have stashed cash in Swiss banks by proposing to offer the tax cheats of Greece an amnesty as long as they pay a flat 21 per cent levy on all undeclared assets. This could get him anything between 2 billion euros and 200 billion euros, but how can he hope to precisely estimate how much they have stashed away?