The financial situation in Greece is becoming even more convoluted than ever before. The Mediterranean country is in uncharted territory following the resounding vote of “NO” in the recent referendum.
The question posed on the referendum was whether or not to accept the terms of an international bailout. This was the first time in more than 40 years that a referendum has taken place in Greece. Leading up to the referendum, the government urged Greeks to vote “no” citing that the austerity measures that would come along with the international bailout would cripple Greece. This is in spite of the fact that refusing to accept the international bailout could mean that Greece is ejected from the Eurozone. At final count, the “no’s” had it at 61.31%.
Greece is now in a unique position. While some of the political figures believe that they now have more bargaining power – other European leaders are refuting this belief. Sigmar Gabriel, Germany’s vice-chancellor states that he hopes the Greek government understands that the 18 other European members “can’t go along with an unconditional haircut (debt write-off).” He goes on to argue that this would set a dangerous precedent, with the potential to “blow the eurozone apart, for sure.”
Eurozone finance ministers are scheduled to meet on Tuesday, July 7, followed by a meeting with all eurozone leaders. It is expected that Greek Prime Minister Alexis Tsipras will bring with him new proposals.
While the situation seems to progressing quickly, it may not be quickly enough for the day to day lives of those living in Greece. The banks have been closed throughout Greece for several days as Greek officials remain concerned that the country’s banks will not have enough euros to see them through this crisis. The European Central Bank (ECB) is currently deciding whether or not to increase the amount it allots as emergency cash support for Greek banks. The banks originally closed last week when the ECB put an end to the emergency cash support, after bailout talks in Brussels broke down.
As it stands, those living in Greece are only allowed to withdraw 60 euros per day from their bank accounts using cash machines. As of Monday, July 6 Greece’s Economy Minister, Georgios Stathakis stated that the ECB will have to support Greece’s banks for the next 7-10 days in order for negotiations to take place at all.
Greece’s financial crisis, and the potential of Greece leaving the euro are being felt around the world as global financial markets are falling. In the U.S. the main market indexes are down 0.3%, while London’s FTSE 100 slipped only 0.76%. That said, Japan’s Nikkei Index fell more than 2%.
As for what happens next in Greece – we will have to wait and find out.