What you need to know about Greece (based on what people are searching for)
We looked at the top inquiries recently typed into Google about the debt crisis, and Greece leaving the Euro. Here are the answers:
- What is Grexit?
Grexit is a mashup of Greek and exit — and refers to the possibility of the Mediterranean country no longer being part of the European Union and losing its “euro” currency.
Greece has been struggling with a financial crisis since 2008. Europe has been trying to rescue it by loaning the country money to pay off its billions in debt, but they’ll only keep lending under certain conditions. Greeks are pretty unhappy with those conditions, which require “austerity” measures — aka, a lot of belt-tightening (like cutting back people’s pensions and benefits). Many people have plunged into deep poverty in recent years and oppose further cuts.
Greek Prime Minister Alexis Tsipras, who swept into power in January with anti-austerity promises, said recently he wouldn’t accept the conditions being required unless people voted on it. He called for a vote on July 5. But the timing is a bit odd considering Greece owes some billions that are due by the last day of June. And all hell has already broken loose. Banks are shut down until after the referendum and people are restricted regarding how much cash they can withdraw from ATMs. People have taken to the streets — mostly to rally against austerity and vote “no.”
2. Can Greece still avoid a Grexit?
Greece is more on the brink of leaving the so-called Eurozone than ever before, but it’s far from inevitable. Officials have confirmed the country will not pay off its loans by the June 30 deadline. That news set off a day of tumbling stock markets in the U.S. and around the world.
As one U.S. director of trading emphasized, there is no precedent for this:
“There is no mechanism to be ejected from the European Union. This has never happened before,” Brian Battle, director of trading at Performance Trust Capital Partners in Chicago, told the Financial Post. “When you don’t know what could happen you sell. You get on the sidelines.”
Some say a strong “no” vote, which the government is recommending, would give Greece more fuel for resistance to a deal, making a Grexit more likely.
But a Reuters poll of economists and traders found the chances of Greece leaving the Eurozone at a median 45 percent.
3. What happens if a Grexit occurs?
Greece may go back to printing its old currency, the “drachma.” The advantage is that Greece could loosen up the value of its currency enough that economic value would eventually creep back. But intense inflation will likely result first. And in the meantime, banks probably won’t do much lending. Money, and people who want jobs, would probably leave the country.
Many worry about the far-reaching global consequences. Greece only makes up 2% of the European GDP, but it could still destabilize the continental currency. A Grexit could open the door for other struggling countries like Italy, Spain and Portugal to rethink their membership in the EU. So far, membership in the EU has been a one way street — you can get in, but you can’t leave.
Polls show Greek citizens want to stay with the Euro (even if they vote “no” on the referendum imposing austerity measures). And government leaders in Greece also seem to want to work something out to stay with the currency.
From the Wall Street Journal:
In a sign that the government in Athens hasn’t given up on remaining part of the currency union, though, it paid €50,000 in fees to the eurozone bailout fund. A failure to pay even this small amount would have put the government into immediate default to one of its biggest creditors.
Prime Minister Tsipras might just be playing hardball with international creditors to see if he can get a better deal for his country — getting loans, but with less dramatic cutbacks.
Via the Guardian, in the early morning of June 30: