Broken? Yes. Irreparable? Probably not.
Greece is in trouble, and it’s going to take a lot more than a short-term fix to repair what anti-austerity measures broke.
The IMF released new numbers this week showing that it will take Greece three years and 50 billion euros just to stabilize its volatile and quickly failing economy. The organization also downgraded Greece’s projected economic growth from 2.5% to 0%, and renewed its call for Greece to agree to an extended debt repayment plan coupled with lower interest rates.
From the BBC:
Greece’s banks have now been closed to all but pensioners for four days, and Athenians have settled into a crisis routine.
At the stroke of midnight, queues form at cash machines as locals scramble to obtain their daily €60 ration.
Neighbours confer over which ATMs are still dispensing €20 bills – those with other denominations can only pay out €50 per day.
But despite the posters that adorn every tree and lamppost calling for “everyone to take to the streets”, the large protests of the past few days have largely died down.
In the radical left Exarcheia neighbourhood, exhausted young anarchists lounge outside bars and cafes, and let the banners hanging across the central square speak for them.
“No to EU and IMF terrorism,” reads one.
“€ + Germany = oppression,” reads another.
At the beginning of this week, Greek citizens were driven into a panic after officials imposed economic controls that drastically reduced access to private funds from bank and pension accounts.
Then, on Tuesday, Greece went into arrears on its multibillion euro IMF loan; negotiations between Greek Prime Minister Alexis Tsipras and other European leaders broke down after Tsipras announced a surprise referendum to give Greeks the opportunity to decide whether or not leadership will agree to a new proposal offered by Greece’s creditors. Protests have calmed, but advocates on both sides of the issue are running a full court press in the run up to the vote.
Interesting cultural note: the instability in Greece has led Europeans to invest more heavily in alternative currencies like Bitcoin. Bitcoin value is volatile, which should tell you a lot about the economic mood in the Eurozone right now.
The BBC posted a helpful chart showing who owns Greek debt, and how much:
Still, from a global perspective, what happens in Greece over the next few weeks is a drop in the pan compared to the effect that larger markets can have on the global economy. From Bloomberg:
A dizzying three-week plunge in Chinese equities has wiped out $2.36 trillion in market value — equivalent to about 10 times Greece’s gross domestic product last year.
Still, the closed nature of China’s financial markets is allowing the rest of the world to watch in wonder without seeing spillovers into their markets…yet.
“What happens in China will turn out to be far more consequential than any sting that Greece may deliver over the coming weeks or months,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. “As China’s equity markets lose their roar, the risk is that demand more broadly on the Mainland could take a hit. That would knock out an essential engine of world demand over the past decade. As dramatic as events in Greece currently appear, however, ultimately, it’s difficult to see these proving decisive for the world economy.”
Greece is set to vote on the referendum this Sunday. We’ll keep you updated on the economic situation across the pond.DONATE
Donations tax deductible
to the full extent allowed by law.