After 'No' vote, Greece and its creditors must find common ground

PUBLISHED : Tuesday, 07 July, 2015, 1:45am
UPDATED : Tuesday, 07 July, 2015, 11:29am

Greece is a country of just 11 million people, accounting for a mere 2 per cent of Europe's GDP. Yet the significance of its "No" vote to further euro-zone-imposed austerity has had global ramifications, causing stock markets to plunge; the Hang Seng Index fell 3.2 per cent yesterday. The worry is that the decision is the end game of a series of unfortunate events over the past two weeks that appear to point to the inevitability of a Greek exit from the euro currency, an outcome that no side wants. As resolute as they have been in negotiations, talks have to continue with a changed tack and tone - for the good of the EU's future.

Greek Prime Minister Alexis Tsipras has come out of the referendum politically stronger. His finance minister, Yanis Varoufakis, resigned to give a fresh start to talks. European leaders, particularly German Chancellor Angela Merkel, were expecting Greeks to side with them on the need for greater austerity and have been caught unawares. They now face not only the matter of Greek debt, but the fate of the euro.

Greece's problems are not solved by the vote, either. It still owes creditors about €250 billion (HK$2.15 trillion) - it became the first developed nation to default on an IMF loan last Tuesday and on July 20 a bond payment of €3.5 billion is due to the European Central Bank. Greeks, their banks closed, well know what it means to live in a nation fast running out of money.

Cutting Greece free from the single currency will not get borrowed money back and will dump even harder times on Greeks. Nor would there be an upside for the euro zone, with the likelihood that markets will from now speculate as to which country is next to leave and camaraderie within the EU itself at risk. Greeks have to face up to reality, just as did the Irish, Portuguese and Spaniards and take the tough medicine of greater austerity so that their economy can also rebound. EU leaders have to be more understanding about the challenges faced and give more latitude with repayments. The new positions can be unveiled at the emergency euro-zone meeting called for today.