- The Washington Times - Sunday, July 5, 2015

Greeks voted resoundingly Sunday to reject the austerity demands of a proposed European Union and International Monetary Fund bailout package, triggering widespread concern that Greece may soon be on its way to exiting the eurozone.

The nation’s leftist prime minister, Alexis Tsipras, who campaigned hard for the “no” vote against more austerity in Greece’s first nationwide referendum in decades, hailed Sunday’s result. He said it will strengthen his government’s hand to negotiate a more palatable deal with creditors, which he accused of trying to short-circuit democratic rule and national sovereignty.

“Today we celebrate the victory of democracy,” he said in a televised address as jubilant crowds marched through streets across the nation chanting, “No! No! No!” “We proved even in the most difficult circumstances that democracy won’t be blackmailed,” he said.

But critics said the “no” vote — which won by a 61 percent to 38 percent margin — dangerously imperils Greece’s long-term economic prospects because it may result in the European Union’s major powers calling for Greece to be pushed out of the 19-member group of countries that use the euro as their common currency.

Heading into Sunday’s referendum, German and other European leaders openly urged Greeks to vote against Mr. Tsipras‘ recommendation and embrace the steeper austerity in exchange for beefed-up EU and IMF loans.

European Parliament President Martin Schulz told German public radio before the vote that if Greeks voted “no,” “they will have to introduce another currency because the euro will no longer be available for a means of payment.”

It was not immediately clear, however, whether German leaders agreed.

While voting was underway, German Chancellor Angela Merkel’s office said German and French leaders would hold a high-level meeting in Paris on Monday to assess the outcome of the referendum.

A statement from Mrs. Merkel’s office said she and French President Francois Hollande agreed “that the vote of the Greek people must be respected.”

Sigmar Gabriel, Germany’s vice chancellor and economic minister, said after the vote that Mr. Tsipras had “torn down the last bridges, across which Europe and Greece could move toward a compromise. … By saying ‘no’ to the eurozone’s rules, as is reflected in the majority ‘no’ vote, it’s difficult to imagine negotiations over an aid package for billions.”

Others called for calm and a continuation of negotiations with Athens.

Gianni Pittella, who heads a socialist grouping of representatives in the European Parliament, said more talks should be pursued in the spirit of “solidarity and cooperation.”

Mr. Pittella said his group would “expect the Greek government to come back to the negotiations with a renewed responsible attitude.”

“It will also be time for some member states and ministers to stop with unacceptable rigidity, national selfishness and domestic political games,” he said.

Belgian Finance Minister Johan Van Overtveldt also said the door should remain open to resume talks toward a new bailout package.

The current bailout — under which Greece received nearly $265 billion in rescue loans — expired last week, on the same day Greece failed to pay due interest on an IMF loan, becoming the first developed nation to do so.

During the days leading up to the vote, banking institutions began imposing tight withdrawal restrictions inside Greece to stave off a run on banks. Throughout last week, long lines formed at ATMs across Athens, where citizens were limited to withdrawing a maximum of 60 euros per day.

Some in the Greek government claimed the bank lines had an impact on Sunday’s vote. Finance Minister Yanis Varoufakis said Sunday night that the nation’s creditors had planned from the start to shut down banks to humiliate Greeks and force them to make a statement of contrition for showing that debt and loans are unsustainable.

Celebrations erupted in the streets of Athens as poll results showed the “no” side would win comfortably.

“We don’t want austerity measures anymore. This has been happening for the last five years, and it has driven so many into poverty we simply can’t take any more austerity,” Yiannis Gkovesis, 26, told reporters in the Athens main square as he held a large Greek flag.

“We look to new negotiations not to impoverish and enslave people, but to bring them to prosperity and freedom,” said Constantinos Papanikolas, 73. “We believe this vote will make a difference.”

Greece’s leftist Syriza party, which swept Mr. Tsipras to power on an anti-austerity platform in January, has argued that stipulations attached to bailout loans have forced Athens to cut the nation’s budget to the bone.

Rather than make more cuts as the EU and IMF are demanding, Syriza has argued that Greece can reduce its deficits and bring about its own economic recovery through other means, specifically by raising taxes.

But the leftist party faces an uphill battle. Unlike Germany, which successfully collects roughly 98 percent of the taxes it imposes, or the U.S., where the figure is around 90 percent, most published reports show the Greek government successfully collects less than 50 percent of the money its citizens owe it under the law.

The Wall Street Journal recently put the figure of uncollected taxes in the nation at roughly $86 billion.

Successive governments in Athens, both conservative and liberal, have long pledged to go after the money but made little progress in reining it in. That reality has prompted skeptics to argue that Syriza, despite its aggressive posturing, will be no different.

The standoff between Greece and the EU, meanwhile, has been building for years. The crisis began during the late 2000s after revelations that successive governments in Athens had misreported data relating the nation’s total annual budget deficit.

The revelations cast doubt over the sustainability of Greece’s overall public finances and prompted many outside financial markets to leave the country.
As the nation’s economy teetered on the brink of collapse from 2010 to 2012, other eurozone governments and the IMF stepped in and offered two financial bailout packages to Athens worth a total of some $270 billion.

A history of the developments published last month by the Congressional Research Service noted that in 2012, Greece also restructured its debt, with investors agreeing to accept a 75 percent loss on what was originally agreed to under the bailout packages.

What’s worse, according to the Congressional Research Service, the Greek economy has contracted by nearly 25 percent since 2007, with unemployment tripling to nearly 25 percent and the nation’s public debt rising from 103 percent of gross domestic product to 173 percent.

Away from such Greek-specific figures, the bigger question is how Greece’s situation may impact the EU relationship with other struggling economies in the eurozone and how the overall ripple effect may have global ramifications.

According to the Congressional Research Service report, some analysts believe that an all-out Greek default “could spark capital flight broadly across the Eurozone for safe havens like the United States.”

“If investors started pulling out of Ireland, Portugal, Spain, and Italy, it would likely cause the dollar to appreciate and could trigger a substantial economic crisis with global ramifications,” the report stated.

This article is based in part on wire service reports.


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