This is an important and detailed article from the WSJ. It’s a recommended read!
So finally the creditors said, ‘Take it or leave it!’. For domestic political reasons in Germany and in respect to other bailout countries, austerity is still part of the deal. This is despite widespread criticism from mainstream economists and both left and right wing media around the world. This offer is essentially political, rather than economic. It’s a signal to others to obey the rules.
Meanwhile, the response from Mr. Tsipras, the Prime Minister of Greece and the leader of the hard-left, anti-austerity, Syriza party, is to call a referendum in Greece, July 5. This was not a surprise because otherwise the Syriza party would have a questionable mandate to sign such a deal.
Between now and July 5, watch out for the following:
- Forced introduction capital controls in Greece
- Closure of banks until referendum
- Level of continued support from the ECB for Greece’s banks
- Campaigning position of government ministers
- Honesty of political classes in Greece about the increased hardship of a Grexit, and
- Announcement of a general election
It will be hard for Greece’s pensioners to accept further cuts to their pensions. But they must be convinced that the alternative is no pension, far deeper cuts or payment in IOUs.
It’s a difficult decision for the citizens of Greece but it’s democracy at work.