Joseph Perry’s News Crunch: Greece Still Stuck
Joseph Perry crunches the news of the Grexit
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Greece has voted against accepting the latest bailout deal proposed by the European Union.
Since the global financial crisis in 2008, Greece has become a symbol of unrest, unemployment and depression as it struggles to launch any sort of economic recovery.
The country has already had to receive two bailouts from the EU’s European Stability Mechanism - which wore worth over 240 billion Euros. However, with banks running out of money, pensions being drained and loans not being repaid, the Greek government is trying to negotiate a third bailout deal.
Two weeks ago, finance ministers from across the EU (led by German delegates) met with Prime Minister Alexis Tspiras and Chancellor Yanis Varoufakis to try and reach some sort of agreement on the future of the country.
EU ministers in the Eurozone take particular interest in these discussions as further financial unrest in Greece could see their collective currency lose even more value - negatively affecting their own economies.
However, despite the fact that a deal is required by all parties, an agreement has been very hard to reach.
EU ministers want to see the Greek government continue to lower public spending while raising taxes; at strategy known alternatively as austerity.
After 6 years of austerity, the Greek public have become fed up and are looking to Prime Minister Tspiras to lead the country in a new direction - but still be a major part of the Eurozone and the EU.
This is proving to be an impossible task.
During the talks two weeks ago, EU finance minister are believed to have proposed a deal to Tsipras, under the condition that certain pro-austerity decisions are taken by his government, such as raising VAT in their tourist hotspot islands.
Tspiras and Varoufakis believe that these measures will negatively impact the Greek economy, and cause more misery to business owners in the country’s famous islands.
As a negotiating tactic, Tspiras announced that he would be holding a referendum on the proposal - although there was lots of scepticism over whether it would go through as talks were still ongoing.
However, as the negotiating teams tried to outdo each other, the discussions stalled and Tspiras was forced to carry out his referendum.
The majority of Greeks voting last Sunday followed the advice of their Prime Minister and voted against accepting the bailout deal.
61.31% of the electorate voted ‘OXI’ (meaning no), compared to just under 40% voting yes.
Since then, Varoufakis has resigned from his post - citing that the country needs a new person to liaise with the EU and reach a deal.
It is difficult to predict what will happen next.
For millions of Greeks, an uncertain financial future is a deeply worrying thought.
Why does this matter?
This is important because it shows that the Greek people will not bow down and accept another 3 years or so of austerity. Previously, the idea of upsetting EU chiefs had been so unpopular that the failing economic policies had been glossed over.
Now a clear message has been sent to Brussels; ‘no’.
However, speaking against the European Union has consequences - with many believing that Greece is at risk of leaving the organisation’s Euro currency.
This may be popular in Greece as it means the country can get on with digging itself out of a financial hole, without being dictated to by Eurozone members.
Taxpayers in other EU countries may welcome the move as well; they feel frustrated and fed up with continually bailing out Greece.
However, being outside the Eurozone may harm Greece.
It would mean that they cannot accept money as easily from other country’s as they try and kick-start their economy, they would also risk being isolated from their European neighbours, and left stranded with a brand new currency.
Although ‘Grexit’ is more likely than ever before, it is still hard to imagine the country’s population greeting such a decision with open arms.
There are also fears that Greece has become more vulnerable to a democratic breakdown within the country.
As people continue to be divided over austerity, bailouts and the Euro, there is a risk that those tensions will reach boiling point.
Previously, Greece has fallen under dictatorships as people become look for quick solutions in the time of weak governments.
These fears remain small, but like ‘Grexit’ they have become far more plausible than at any time over the last decade.
Joseph’s Verdict This is something that the EU did not see coming.
They believed that the promise of money and an eventual solution to the spiralling crisis in Greece would convince the public to keep faith in austerity.
However, this mind-set has been thwarted.
Although it has been seen as a failed negotiation tool, Tsipras’ eleventh hour referendum is perhaps the biggest wake-up call EU financiers have ever received.
However, they still have a right to expect their money back. Writing off Greek debts now would set a precedent to every other country in the developed world.
I cannot take a referendum of my house and decide that no one wants to pay the bills, and the Greek government cannot do the same (though and a slightly bigger scale!).
I believe that loan repayments to Greece need to be set back by at least 20 years, so that the government can focus on a proper recovery and not just being able to meet their latest repayment deadline.
That way the EU gets its money back, and Greece is given time and space to recover.
However, the issue is nowhere near as simple as that.
In order for the country to achieve that, it needs to seriously consider breaking away from the shackles of the Euro - even if it means they become the first country to leave the Eurozone.
The important thing is to ensure that people can eat, shelter and power their lives, not to protect a superficial union.
If the EU does not allow Greece to manage its own recovery, it needs to leave.
Balancing either an exit or major renegotiation with keeping a civil democracy is a nigh impossible task, and one that I am in no place to issue any advice on.
All we can do is hope that a settlement of sorts can be reached, before it is too late.
To hear Joseph breakdown more of the week’s biggest stories, listen to TeenScope this Sunday (28th) at 9pm UK time.