Greece debt crisis: Defiant Tsipras seeks referendum backing

30 Jun 2015 | Author: | No comments yet »

A Greek tragicomedy.

Defiant Greek prime minister Alexis Tsipras has urged his people to reject terms set by his country’s creditors, insisting a No vote in Sunday’s referendum would strengthen his negotiating hand. Tens of thousands of Greeks rallied on Monday to back their leftwing government’s rejection of a tough international bailout after a clash with foreign lenders pushed Greece close to financial chaos and forced a shutdown of its banking system.

Greece’s debt crisis, which has the beleaguered country teetering on the brink of total economic collapse, drove U.S. stocks to their worst day of the year, but some experts believe the markets will sort themselves out — even if Greece leaves the European Union. “Markets are worried whether that will have side-effects on other vulnerable countries, such as Portugal, Spain and Italy, but our view is the downside risk to those economies is manageable, and serious contagion to other countries is not a highly probable event,” said Sara Johnson, an economist at IHS Global Insight in Lexington. “The European Union and the European Central Bank will take whatever actions are necessary to stabilize other eurozone economies.Should the “yes” side defy him and prevail in a 5 July referendum he called after talks broke down, voters then might need to elect a government that can return to the negotiating table. So this will be a ripple rather than a wave for the global economy.” Investors fled stocks in Europe and the U.S. for the safety of government bonds yesterday. The country’s current bailout expires today and without access to additional funds the radical left Syriza government will unable to make a 1.6 billion euro payment to the International Monetary Fund (IMF), becoming the first developed country to miss such a commitment.

The show of defiance came at the end of a day that started with stunned Greeks waking up to face shuttered banks, long supermarket lines and overwhelming uncertainty over Greece’s future in the euro zone. While credit ratings agencies said that it would not immediately trigger a default rating, it will mean Athens cannot get any further funding from the world financial body until it has cleared the arrears. On another day of high-stakes brinksmanship, Mr Tsipras insisted that he would not bow to pressure from Greece’s creditors in the IMF and the eurozone.

I think you would have to have a series of cascading bad news to really engender a bear market.” “This Greek tragedy just keeps going,” Armstrong said. “We need to put on our seatbelts and get through this. British holidaymakers heading for Greece were warned by the Foreign Office to take enough euros in cash to cover their spending needs as well as any possible emergencies.

Drugmakers said they would continue to ship medicines to Greece in coming weeks despite unpaid bills, but warned that supplies could soon be in jeopardy without emergency action. While Greek bank bonds plunged on Monday as the country implemented capital controls and a credit-risk benchmark in Europe jumped, the euro limited losses and indicators of banking stress across the continent stayed steady.

Although restrictions on bank withdrawals do not apply to accounts held outside Greece there are fears that cash machines will simply run out and that credit and debit cards may no longer be accepted. What Greece did with this referendum is get itself into a one-way street it can’t get out of.” If Greece defaults and switches to a new currency it would be unprecedented for a European Union country. The calm was supported by statements from German chancellor Angela Merkel and other European leaders that, while the referendum has closed the door on aid this week, it could still be reopened if Greeks back the terms tied to assistance.

But if it decides to stay, it will need to figure out a way to pay back its creditors — a nearly impossible task. “There is going to be pain, no matter what,” said Peter Ireland, an economics professor at Boston College. “They borrowed more than they can ever repay, and one way or another that is going to entail sacrifices in the future.” Tsipras has pledged to implement the result of the referendum, yet the betting is he would need to call Greece’s second election since January and the fourth in less than four years.

While the UK is not part of the eurozone and had not been directly involved in negotiations, he warned that the Greek crisis remained “one of the biggest external risks to the British economy”. “I don’t think anyone should underestimate the impact a Greek exit from the euro would have on the European economy and the knock-on effects on us,” he said. “The eurozone authorities have made clear that they stand ready to do whatever is necessary to ensure financial stability of the euro area and we welcome that commitment to the currency. COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. By midday, all three major US stock indexes were down more than 1 per cent. “I can’t believe it,” said Athens resident Evgenia Gekou, 50, on her way to work. “I keep thinking we’ll wake up tomorrow and everything will be OK. I’m trying hard not to worry.” After months of talks, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras for rejecting a package they consider generous.

While rejection of the bailout requirements would maybe lead the ECB to rethink providing Greek banks with loans they may default on, a signal Greece was willing to talk would perhaps mean president Mario Draghi doesn’t yet close the spigot and maybe even opens it more widely. Signs of a rethink in Athens should also be enough for European governments to provide temporary financing for Greece as it elects a new parliament, according to Erik Nielsen, chief economist at UniCredit SpA in London. Once that occurs and the legislature passes reforms, the outstanding €15.7 billion of aid would be delivered along with some form of debt relief. “A ‘yes’ vote to reforms and fiscal tightening in return for continued euro-zone membership is the most likely outcome,” said Nielsen. “The ‘Greek issue’ will hardly be over for good, but we’ll have bought at least a year of peace.” Bloomberg

Hollande spoke to US President Barack Obama, and Hollande’s aide said they had agreed to work together for a resumption of talks and a solution to the crisis to ensure Greece’s financial stability. The queues in my neighbourhood were too long yesterday,” said plumber Yannis Kalaizakis, 58, outside an empty cash machine in central Athens on Monday. Businesses complained that they could not pay salaries or suppliers and had to halt imports, while agricultural production was also expected to be affected. Even in those sweet times, though, Greece’s budget deficit was high at some 12 per cent of GDP but the leading European powers behind the Euro gave them the benefit of the doubt.

Things like its complex tax structure with six differential regimes of value added tax, the excessive size of public sector and the early retirement schemes were again all held up to global scrutiny.

Here you can write a commentary on the recording "Greece debt crisis: Defiant Tsipras seeks referendum backing".

* Required fields
Twitter-news
Our partners
Follow us
Contact us
Our contacts

About this site