On Sunday Greece’s parliament easily approved Prime Minister Alexis Tsipras proposal for Greece to hold a referendum vote on July 5th to accept or reject the latest bailout terms that were on the table last week by Greece’s creditors.
Passing by a margin of 178 to 120, a majority of Greek lawmakers supported Tsipras’ proposal and surpassed the 151 votes that were needed for approval.
Greece now faces the growing prospect of going into arrears and defaulting on its €1.6 billion loan that is due to the IMF on June 30th, five days before Greece holds their referendum vote on July 5th.
The birthplace of democracy will now ask its citizens to exercise their freedom and render a decision on a plebiscite that could have far reaching implications for the cohesion of the 19 member currency bloc and could even catapult the cash strapped country out of the euro area as it struggles to adopt the requested austerity budget cuts and tax increases that Greece’s creditors have demanded.
During a recent speech that saw Greek Prime Minister Alexis Tsipras requesting a new referendum vote, Greece was portrayed as a victim of “punitive austerity” from its creditors that he claimed violates European “social rules” and humiliates the entire Greek people.
Tsipras said the attached bailout conditions from Greece’s creditors was “blackmail-ultimatum” for the acceptance of a strict and humiliating austerity proposal that doesn’t allow Greece to stand on their feet economically or socially.
“The proposals of the institutions include measures which lead to a further detribalization of the labor market, pension cutbacks, new reductions in public sector salaries and an increase in VAT on food, eateries and tourism, with an elimination of tax breaks on the islands” Tsipras said.
“These proposals clearly violate European social rules and fundamental rights to work, equality and to dignity, proving that the aim of some partners and institutions was not a viable and beneficial agreement for all sides, but the humiliation of the entire Greek people” Tsipras added.
After villainizing Greece’s creditors, Tsipras made no mention of the years of overspending by former Greek governments or mentioned the global recession that further weakened the Greek economy and led its government to request a €240 billion bailout from their creditors.
Several other European countries that have received large bailouts by complying with austerity demands from the same group of creditors have some anti-austerity movements operating in their countries whose supporters are watching closely the developments in Greece along with how the ECB deals with Greece’s dependent banks that are under growing pressure due to deposit outflows and may see capital controls imposed on them.
German Finance Minister Wolfgang Schauble said yesterday that “We will do everything to fight any possible contagion” which is in reference to other euro area member countries with struggling economies.
What happens in the case of Greece could establish a new precedent for how the euro group and international creditors deal with other member countries that have struggling economies and large debts on their balance sheets.
To complicate the situation even further, the details of Greece’s referendum vote on last week’s bailout terms from its creditors appears to need some more verification with a legal team of experts.
Christine Lagarde, Acting Director of the IMF, told the BBC that the Greek referendum on the terms of any new bailout plan will be invalid after Tuesday (June 30th) when the current programme expires.