The significance of this mounting and rapidly developing Greek tragedy, most politicians in Europe agree, is its likely effect on the stability of the single currency, the beleaguered euro, if not on the whole European project itself. If there is a Greek exit (the vaunted “Grexit”) from either the currency or the politico-economic union of 28 member states, the impact on each or both could be devastating, but nobody really knows this because it has never happened before. It, or something like it, could very well happen any day now, depending on the outcome of the surprise referendum on the terms and conditions of future bailouts, called by Prime Minister Tsipras for Sunday 5th July.
Other voices speak, increasingly loudly, of a different significance. These voices, heard in Athens and other major European cities, have been getting louder this week. These are the voices that remind us of the effect on the poor, weak and elderly in a country which, as this week ended, was reporting alarming shortages of banknotes, basic medicines and, increasingly, some staple food items. This alternative perspective suggests that it’s the ordinary people who are suffering, particularly the poor and the elderly, and that their plight is subordinated to the needs of the rich nations and the international bankers. The stringent conditions attached to further bailouts will, these voices assert, cause misery for many for years to come.
The Greek financial system has turned into a cash economy as the banking sector gasps for oxygen and liquidity – they’ve run out of hard cash. A daily withdrawal limit of €60 at ATMs is in force to head off a run on the banks; bank branches have closed for some days, although with some limited provision for elderly retirees, while there are no €10 or €20 denomination banknotes left in any of the ATMs. What is left of the national economy is on the verge of collapse as the tourist industry, a huge earner for Greece, suffers mass cancellations. With bank transfers now impossible, traders can’t pay suppliers so no supplies are coming in. One estimate suggests that the economy has already lost over €1.2 billion in a week, a cost that will have to be included in any further bailout eventually negotiated. Greece had been ill-prepared for the 2008 global financial crisis, having become over-dependent on EU investment aid, which dried up on the accession of new, poorer EU member states to the east, while the government, saddled by an inefficient taxation regime, kept on spending, borrowing heavily to do so.
This has been a complex problem that has grown more complicated by the day. It has taken EU politics into uncharted waters. There have been fresh unforeseen developments every day. Of the many twists and turns, that caused this blogger to abandon and restart this posting four times, the biggest is Prime Minister Tsipras’s surprise calling of a referendum. His ruling party Syriza, a Greek acronym for Coalition of the Radical Left, came to power on a sweeping anti-austerity platform in January 2015 whereupon its anti-austerity programme quickly worried investors and bankers. And thus the seeds of this week’s crisis were sown. In many ways we can at least attempt to understand what’s happening as an ideological battle between the proponents of austerity and those who propose stimulated growth and quantitative easing to beget recovery.
The referendum asks the Greek people if they want the government to accept the swingeing conditions attached to further bailouts. It looks increasingly like a referendum on remaining in the Eurozone and, indeed, the EU. Both the currency and the Union have struggled for credibility in recent years. Were Greece to leave either or both – and there is no precedent and no legal mechanism for this to happen, at present -- nobody really knows how this would affect the EU. Tsipras denies that a No vote would lead inexorably to Grexit; few feel that he can deliver such an outcome.
The so-called “Troika” of the Frankfurt-based European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission are clearly the opposition to the Syriza government. Both Prime Minister Tsipras and the Finance Minister, Yanis Varoufakis, have in recent days defiantly called their proposals “blackmail”, opposing further austerity measures, attached to additional bailouts, as the only way out of this crisis. The current bailout agreement with the Troika ran out this week and Greece defaulted on a major repayment due to the IMF, the first major economy in the global north to do so. Any new bailout, according to these creditors, must be conditional on further deep austerity measures; Syriza refuses to accept the inevitability of such measures and, in calling for a No vote on Sunday, expects to have its hand strengthened in the fresh negotiations that will begin on Monday.
Now a growing number of protestors and observers across Europe are calling for an alternative solution. Some have drawn attention to the post WW2 debt-relief afforded to Germany and what that led to; Germany is now by far the economic powerhouse of Europe although also holds the biggest share, at €68bn, of Greek debt. Varoufakis has claimed that the Troika wants the referendum to go against the Syriza government in Athens in order to “humiliate” the Greeks, accusing the creditors of “terrorism”. Opponents of the Troika’s position, alarmed by the prospect of further suffering, are saying that the plan is good for the creditors and the big banks but not for the ordinary Greek people. Cited in British media, Nobel laureate economist Joseph Stiglitz stated that ”A No vote would at least open the possibility that Greece […] might grasp its destiny in its own hands. [It would be] far more hopeful than the unconscionable torture of the present”. Jeffrey Sachs went further: “I recommend that the Greek people give a resounding “no” to the creditors in the referendum on their demands this weekend”. His is one of a growing number of commentators and campaigners demanding that, instead, the Greek debt burden must be eased.
Some observers suggest that the Troika really wants regime-change. Tsipras probably understands that his political future depends on this vote. He said: "If the Greek people want to proceed with austerity plans in perpetuity ... we will respect it, but we will not be the ones to carry it out." The rich creditor nations and banks have looked unprepared for Syriza’s robust response and may not deal with Tsipras and his colleagues even if the referendum goes their way. For Tsipras, Syriza and the nation’s populace, those who bear gifts to the Greeks are to be feared.
David Stewart, S.J., is America's London correspondent.