Greece is as close to exit from Eurozone as never before. 60% of the Greeks said ‘No’ to austerity measures offered, or it would be better to say required, by European Commission. Let’s trace back the whole scenario of Greek crisis to clearly understand the meaning of this ‘No’ for Greek economy.
In April 2010 Greece got a total bailout of €246 billion from the EU, ECB and IMF. In accordance with agreement Greece came up with seven austerity packages aimed at reductions on some public services. People responded with overall revolt. They rose against increased working hours and salary cuts.
In May 2014 Greek government changed and the power was shared between socialist Syriza party and the Independent Greeks party. Alexis Tsipras became Prime Minister and the wave of new negotiations with creditors began.
Mr. Tsipras asked for prolongation of credit payment terms calling current ones “dishonorable” and “not able to stomach it.” June 28 was a crucial date of referendum where the Greeks should have decided upon their fate. The question was whether Greece accepts additional funding from Eurozone and proposed austerity measures as a consequence or not.
New Greek Finance Minister announced. pic.twitter.com/HO3ZQEV7U1
— Left Outside (@leftoutside) July 6, 2015
The choice is already made and now Greece should return to its own currency. It’s not necessary to do immediately – the country has several weeks to start printing drachma again.
Only a few hours after the poll was declared Greece’s finance minister Yanis Varoufakis announced his departure. According to him the present referendum “will stay in history as a unique moment when a small European nation rose up against debt-bondage”.
Behavior and expressions of Mr. Varoufakis (“austerity is like trying to extract milk from a sick cow by whipping it” is only one of the most memorable) have always met disapproval of the EU. His resignation is an obvious step that Prime Minister Alexis Tsipras makes towards further european negotiations.
He almost has no other choice – Greek banks that have been closed for a week to stop a massive outflow of money are so low on funds that they could collapse in days without urgent measures and bailout from the European Central Bank.
Greek situation badly influences world’s financial markets. Monday was characterized by equity market decline all over the world and oil price drop by 7% in the USA. Talks between Iran and world powers to meet a July 7 deadline on a nuclear deal have also added instability on the energy market.
Olivier Jakob, senior energy analyst at Petromatrix in Zug, Switzerland, explains the current world’s disorder: “Uncertainty over Greece is bearish for oil. It adds an extra negative factor on top of the turmoil in Chinese financial markets, the recent rise in U.S. drilling rigs and a potential increase in Iranian oil supply”.
We have already written that bitcoin has surprisingly won at this battle of Greece and the EU. Last week its price went up to $255. At around 6 pm on Sunday bitcoin has reached its peak of $273 according to the Coinspeaker Bitcoin Price Index. Many bitcoin experts now strongly believe that bitcoin can really serve as a way out of difficult economic situation in Greece. Nick Szabo, digital currency researcher, shares this point of view and his opinion is likely to be crucial for bitcoin society.
ATMs in Greece are now offering other services as they run out of cash. pic.twitter.com/qd2aI7VmOG
— David Schneider (@davidschneider) June 29, 2015
Szabo conducted a research and found out that bitcoin can help Greece as it’s a borderless international payment method that can replace cash. He develops the though in his blog post: “It doesn’t help much to sell bitcoin to isolated individuals: as a mere store of value its volatility is much greater than most existing currencies; as an investment it only makes sense as a tiny high-risk fraction of one’s portfolio.”
He continues: “Bitcoin does have some political-affinity and status value in developed countries; by contrast in many developing countries and in countries under financial crisis such as Greece, there are urgent needs bitcoin potentially can address. In terms of these needs Bitcoin is mainly useful as a way to send money across borders for investment in more stable assets overseas, and to substitute for cash or other substitute currencies in a money-starved environment.”
It’s hard to say what way of economic development Greece will choose now. Will it take a good look at bitcoin? Will see soon!