What next for Greece?
06/07/2015 13:49

That most Greeks want an end to the European led austerity drive which has pushed the country’s economy into deep recessions over the past five years was made clear on Sunday as 61 per cent of the public rejected the tough spending cuts and tax hikes that the creditors want for releasing further European bailout aid.

The results of the “no” vote have thrown the ball back to the court of the European Union even as the Greek Prime Minister Alexis Tsipras expressed joy at his country’s outright rejection of austerity, pinning hopes on Sunday’s verdict to give Greece a stronger hand to reach a deal with its creditors.

Greece which last week became the first developed country to default to the IMF, as it failed to repay the 1.6 billion euro due to the Washington-based lender, is on the brink of a financial collapse, and an exit from the euro could push the country into an economic unknown.

At the same time, Greece has chosen to break out of the austerity trap which has only deepened the country’s economic troubles, offering no respite to the country’s enormous debt pile.

The IMF last week noted that Greece needs an injection of 50 billion euro over the next three years and easier bailout terms from the Euro area to make its debt sustainable.

European leaders that meet at an EU summit on Tuesday to decide Greece’s euro future will take into account the rising cost of keeping the region’s most indebted country within the currency block as without a commitment to painful reforms, a financial rescue of Greece by Europe looks highly unlikely, placing Greece on the brink of a financial collapse.

The European Central Bank (ECB) will meet on Monday to decide whether to extend a new financing lifeline to the ailing Greek banking and financial system which last week had been ravaged by the imposition of capital controls by the Greek government to stem withdrawals amid investor panic ahead of the referendum.

“Our immediate priority is to restore the Greek banking system,” Tsipras, 40, said in a speech after the result of Sunday’s referendum.

“I’m confident that the ECB fully realizes the humanitarian side of the crisis in our country.” he added.

Can Greece which is rated deep junk by the world’s top three rating agencies survive on its own without European support? That is the big question as the EU and Greece get ready to lock horns once again.