/ world today news/ These days the future of the Greek economy and the entire eurozone is being decided. A referendum has been set for July 5, at which the Greeks will decide whether it is worth accepting the conditions imposed on Greece by the international creditors as conditions for further loans.
Prime Minister Alexis Tsipras himself has called on citizens to reject the terms, which would mean further belt-tightening, and European leaders have pointed out that Greeks have essentially been offered the choice of staying in or leaving the eurozone. However, by 1:00 a.m. on Wednesday, Greece had not been able to make a payment on its debt to the IMF.
By failing to transfer €1.5 billion, Greece became the first developed country to accumulate an overdue debt to the IMF and no longer have access to the institution’s financial resources, which would in turn face the biggest bankruptcy in its history. What could be the further development of events?
Vote yes
A “yes” vote on Sunday to conclude an agreement would have to overcome all the difficulties, and for the SYRIZA party, which is proposing a “no” vote, it would mean additional political problems. This left-wing party enjoys the support of a coalition partner – the nationalist party “Independent Greeks” as well as the far-right “Golden Dawn”. By the way, the main opposition parties such as the center-right “New Democracy” suggest voting “for”.
As two recent opinion polls have shown, Greeks want a deal rather than an exit from the eurozone, but those polls were taken before the referendum was announced. The problem is that even if the SYRIZA-dominated government adopts an economic program acceptable to the Eurozone, will other countries believe that Greece will actually start implementing this program? If Tsipras, who has pledged to vote “no” loses the referendum, his reputation will be seriously damaged and he may resign.
A “no” vote and a chaotic exit from the Eurozone
This scenario will be characterized by a long period of uncertainty and crisis, the finale of which will be the exit of the eurozone by Greece and the introduction of a national currency – probably the drachma. The process promises to be quite chaotic. Above all, the ECB will ban lending to all or almost all Greek banks due to their insolvency. This will be preceded by a period of restricted use of bank accounts and access to assets, which is partly already in place. For the Greek economy, which is already experiencing a crisis, this will be a very painful blow.
The government is about to adopt a decision to issue a national currency, either electronically or in cash, which will restart the banking system. But what will happen to the revival of the drachma? According to the general opinion, it will quickly begin to lose value. This will lead to the danger of inflation as import prices will start to rise. Complexities also arise with the financial side of the contracts: in what will the calculations be made, in drachmas or euros? The government may need to urgently change legislation to maintain control of the situation.
Vote “no” and leave the eurozone under agreed terms
Another option is the exit of Greece from the Eurozone under agreed conditions. He might be less chaotic. But for the bank’s customers, it will still mean converting their savings into drachmas.
Both scenarios of a “no” vote leave the question of Greece’s EU membership unanswered. As one of the lawyers of the ECB wrote back in 2009, “exit of a member country from the economic and monetary union without simultaneous exit from the EU is not possible from the point of view of the legislation”. But what if Greece does not want to leave the EU? There is no procedure for excluding a country from the EU, and won’t other countries also ask for it to remain in the EU if they have already given up on its status as a member of the Eurozone?
Naturally, the EU membership treaty can be changed, but this is a rather complicated process with many pitfalls, including the need to hold referendums in a large part of the member states. In other words, it is possible for life to go on as before, without thinking about the dubious legal basis.
In short, this is the list of the most possible scenarios, although other options are probably possible. But whatever path Greece chooses, it does not promise a quick way out of the current crisis.
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