By: Rolf Li
As you may have heard in the news, Greece is officially the first developed country to miss an International Monetary Fund (IMF) payment in the history of civilization. Now the country that “is the bedrock of democracy” is facing one of the worst economic downturns that have every occurred. If you have read my previous article on the economic collapse of the Eurozone (http://zakopinion.com/2014/09/07/eurozone-loses-grip-euro-continues-downwards-slide/) , it is clear that Greece is the first country in Europe to finally crumble and default on its debt. So what is next for this cash-starved, bankrupt nation?
Greece has an estimated GDP (Gross Domestic Product) of 242.2 Billion USD, which contributes to around only 2% of the Eurozone combined GDP. Ever since the recession in 2008, the Greek Debt to GDP ratio is 175.1%, and the unemployment rate in March 2015 was 25.6%, one of the highest in the developed world. So what is going on with the country? If it isn’t obvious enough, Greece has been overspending for years upon years, and is now paying the price for not cutting back on spending and controlling government debt. Greece owes a grand total of 323 Euros to countries, banks, and organizations. 5 years ago, Greece was also teetering on the verge of bankruptcy, and there was no end in sight, but the IMF applied and loaned a large sum of 110 Euros in bailout funds to encourage economic stability and recovery. Now, Greece was not able to repay the 1.6 Billion payment that was due on June 30th, 2015. Hopes of another bailout plan came short after 6 PM EST after the deadline came to a close, but there is a glimmer of light at the end of the tunnel. A supposed agreement is in the works after the Greek government said that they would follow even more austerity measures, such as pension cuts and heavier taxation, in order to receive a 2 Billion Euro bailout fund–again. However, the referendum that will be held on Sunday will determine in Greece will stay in the Eurozone, as the citizens of Greece will decide if they want to have the demanded austerity measures that Germany, France, and other countries are demanding. If they vote “No”, Greece will most likely fully default on national debt, and will be forced out of the Eurozone. The country will revert to using the Drachma as a national currency, and the situation will worsen as value of the currency will deflate and international creditors will still demand that loans be paid back in full. There is most likely only 2 solutions to this massive problem. First, more austerity will be applied and a bailout will be lent, or a debt forgiveness plan is forged to relieve Greece of its debt. Either way, this will not be easy on Greece, or the world. So should Greece vote “YES” or “NO” to austerity? What’s your zakopinion?