Greek People aspiration: A disaster in the making By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

July 17, 2015 | Posted by bobbysrinivasan << back to blog

Nobody would have thought a year ago that Greece will jump the ship and take a huge risk to go on their own leaving the strong euro zone. The citizens of the Greece took a very bold step and voted a resounding ‘no’ to the collective Eurozone proposal of austerity measures to be adopted by them in order to get the necessary loan of around 7 billion euro from the European central bank. The results of the referendum held on Sunday the 5^th of July 2015 came up with the following results.

Yes: 38.7%. Those who support the austerity measure to receive the loan.

No: 61.3%. Those who rejected it and are willing to face the consequences.

Based on the outcome, a summit of the Eurozone is called for Tuesday the 7^th of July 2015. Greece in the past accepted the euro zone austerity measures to reduce the annual budget deficit. It clearly didn’t work. In the last 5 years their GDP has dropped by nearly 25% and the unemployment rate soared to 27%. When the Eurozone presented further austerity measures to Greece which involved increasing the already very high Value Added Tax (VAT) further and cutting old age pensions. P.M. Tsipras and his Syriza party though this was further humiliation. He and his party accepted the challenge in spite of the warning that a no vote would mean cutting bridges with Europe and driving Greece’s crippled financial system into outright bankruptcy dramatically worsening the country’s 5 yearlong depression.

This is a conversation between a student and his professor.

Student: Professor, do you think P.M. Tsipras made the right decision in calling the referendum.

Professor: I honestly don’t know what his choices were. He is the leader of the left wing party. But one thing is certain. It will not be easy for them to borrow money in the capital markets. Greece has one of the highest public debt.

Student: Really how much does Greece owe and to whom?

Professor: Glad you asked the question. Here are the numbers.

Country	Amount (in Euros) owed to them by Greece
Germany	68.2 billion
France	43.8 billion
Italy	38.4 billion
Spain	25.0 billion
IMF	21.4 billion
ECB	18.1 billion
Netherlands	13.4 billion
United States	11.3 billion
U.K.	10.8 billion
Belgium	7.5 billion
Austria	5.9 billion
Finland	3.7 billion
Total	267.5 billion

Besides these Greece banks also carry 80 billion amount of debt.

Student: Where did all this money go? After all Greek has a population of 11 million, which is lesser than say Bombay Metropolitan population.

Professor: I will make a guess. Rich people in Greece have taken their country to the cleaner. Greek government has announced that they are willing give amnesty to all their citizens who have cheated the country and move the funds illegally to Switzerland as long as they repatriate the money back to Greece and pay 21% flat tax. According to some press report the amount could be as high as 200 billion euros.

Student: It is such a shame that common people have to go through so much pain and anguish. Either way whether Greece is retained in the Eurozone or exit voluntarily or compulsorily. It will be a sad day for them. If they go back to their original currency Drachma whose value will drop horrendously and their standard of living will take a severe beating. I notice that India is not in the picture at all. Are we then safe?

Professor: I hope so. The contagion effect on the global stock market is harder to predict. Let us watch as to how things will pan out in future.

Student: Thanks for the informative huge session.

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