Greece to Decide its Economic Future

Photo from NYTimes

You’ve heard about Greece and their economic struggle in the news before, and it’s all coming full circle today. Today, Greece was supposed to repay over one billion dollars in loans, but they don’t have the money. They don’t have any money, really.

In the past, the deadline has always been extended. This time around, the creditors asked over the weekend for pension cuts and tax hikes, which didn’t sit well with the Greek Prime Minister Alexis Tsipras considering a quarter of the Greek workforce is unemployed.

Greece has closed their stock market and banks to prevent people from taking out all their money, but stock markets around the world plummeted anyways.

European stocks started the day with losses of 4% or more as investors reflected on the weekend news from Greece: of the planned referendum, bank closures and capital controls. The sell-off reflected a sharp change in mood compared with Friday, when investors were expecting that Greece and its creditors would reach a deal. The Portuguese stock market was one of the worst affected, falling almost 6% at the open on fears that the economy would be dragged into the crisis (the Athens stock exchange is closed).”

On July 5, Greece votes whether or not to accept the creditor’s terms.

A “Yes” vote means that Greece will continue the grinding era of austerity that has caused so much pain to its citizens over the last five years, in exchange for keeping the euro currency and the monetary stability it provides.

A “No” vote almost certainly means that the country will walk away from the euro and create its own currency (which will surely devalue sharply), bringing financial chaos in the near term but creating the possibility of a rebound in the medium term as the country becomes more competitive with its devalued currency.”

If the “no” vote prevails, the shock will be felt in European and global markets.

“There may be a middle ground, too, in which Greece semi-exits the euro: Imagine keeping the currency but with such strict and permanent capital controls that Greek’s euros are actually a different currency from the one used in Paris or Rome.”

We will keep a close eye on this story and will let you know what is decided in the referendum on Sunday.

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