Having first run out of money, Tsipras is now running out of time

Anna Sonny, 3 July 2015

After what seemed to be an everlasting series of meetings and 11^th hour negotiations, Greece finally defaulted on its debt to the IMF this Tuesday. The European Union, set up to secure peace and prosperity across the continent, is experiencing quite the opposite. The IMF’s exhausted patience and Greece’s exhausting funds have created more chaos.

While Greek Prime Minister Alexis Tspiras and his government have presided over the collapse of the bailout and Greece’s recent fall in economic growth (last year it actually grew at 0.7% after shrinking for 6 years) , they are not the only actors responsible for this crisis; there are many, including the Greek government that fudged economic figures to join the euro, the creditors who insisted on prescribing more austerity to an ailing economy, the Greeks who didn’t pay their taxes, and the EU leaders who were so relentless in their desire to keep the euro together that they failed to prepare for this inevitable eventuality.

Tspiras’ stubbornness caused him to walk out of negotiations on Tuesday and push his country closer to the brink of collapse; but the prime minister was determined to defend the Greeks from pension cuts and VAT hikes. It is now likely that these will have to happen anyway.

The referendum called for this Sunday seems to be a panicked move – Tsipras is attempting to do with time what Greece has been doing with money – trying to buy more of it even though it has already run out. The Greeks will vote ‘Yes’ or ‘No’ to a complex, 72-worded question on whether to accept proposals from creditors that are no longer valid, as they were taken off the table when the bailout expired.

There is a complex combination of possible outcomes to this crisis – whether the Greeks vote yes or no in this referendum, may decide whether the Tspiras government collapses, or a new one is called. Either way, negotiations will have to be made with creditors, and they will be just as tough, if not tougher than the failed ones this week. They will most certainly lead to more austerity. If there is no deal and the ECB cuts off Greece’s last remaining financial lifeline, then the debt-stricken country may end up approaching Russia for financial aid – which would be a nightmare for the EU. All possible outcomes will certainly be painful, for Greece and its creditors.