What are Greece’s options after ‘no’ vote?

After Sunday’s ‘no’ vote in Greece, all sides are uncertain about what will happen next. Stephan Richter of The Globalist and Paul Krugman of The New York Times offer different perspectives on what the vote means for Greece’s future.

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    We turn now to a look at the broader debate under way in the wake of the Greek referendum.

    For that, we're joined by New York Times columnist Paul Krugman, who is also professor of economics at the Graduate Center at the City University of New York, and Stephan Richter. He is publisher and editor in chief of The Globalist.

    Stephan Richter, you just heard that statement of optimism coming from the Greek ambassador. What do you think the fallout is going to be from the vote this weekend?

  • STEPHAN RICHTER, The Globalist:

    It's going to be severe, because there have been lots of attempts, from Angela Merkel, from the SPD in Germany, from certainly the leader of Italy, France, and so on, to build a bridge for Mr. Tsipras.

    Angela Merkel herself took him basically under his — wing, a neophyte, a young politician. She wanted to build a bridge. She risked a lot. But the Greeks, basically, this government has thrown away the belief of others that, even if we had a deal tomorrow, something magical happened, that it has either the will or the capacity to implement the agreement.

    As we know from many of these agreements over time throughout the world — this is not just a Greece situation. Washington, with the IMF, has dealt a lot of conditionality and other things over the years. Countries must be willing to change in order to get to a brighter future. And it's not about just opening banks and throwing some money their way. That would be nice if it were that.

    But the situation really is, if you think all the euro crisis away, Greece had problems before it got ever started in the euro. Those problems are still with us. And that's what it needs to rectify. And money can't change that. It takes far deeper change in Greece.


    Paul Krugman?

  • PAUL KRUGMAN, The New York Times:

    Well, I think one thing that is really important to understand just how much effort Greece has put in. Greece has achieved an incredible budget adjustment. It has raised taxes and slashed spending to the tune of what would be more than $2 trillion a year if it was happening in the United States.

    So, we're talking about a Greek government that has under successive leaders made enormous sacrifices. It's bizarre to have people talking as if they haven't done anything. They have done a lot of these structural reforms as well.

    The problem is that what the euro leaders, the Troika, had been trying to done do is essentially impossible. When a country is fairly deep in debt, as Greece was, even at the beginning of this, though it's worse now, to try to, through austerity, bring that debt under control, is an impossible task.

    What you're doing is, you're bashing the economy so badly that the economy shrinks faster than anything you can do on the budget side. So, no, essentially, Europe has been completely living in a fantasy world on all of this. I don't know what the answer — I mean, I suspect that the answer is going to be Greek exit from the euro. But the notion that Greeks have somehow failed to deliver, after all the incredible suffering they have gone through, is just — part of the problem is that belief.


    Stephan Richter, we have seen today the IMF and the European Central Bank and the Netherlands and Germany all pretty much hold the line. Do you think they hear what it is that Mr. Krugman is talking about?


    No, because the point he's making about debt relief, and which he made in The New York Times today, is really not what is at issue.

    I don't think there are many German politicians or even German citizens who are expecting any money back out of Greece. I think there was a big mess. The German banks were in part faulty. Investment banks, Goldman Sachs helped the Greek government fake its statistics and so on. There's plenty of blame to go around.

    Nobody expects money comes back from Greece. But Greece has a tradition of taking the concession and then not delivering. When they got into the euro, basically, the benefit was that Greece got much lower interest rates, which helps an economy, helps entrepreneurs to do business. But instead of using it to improve their economy, they basically used it to hire more people in government.

    Every party packed the payrolls of the government, and then they were unelected, and the next team came in, the old guys stayed. And this is not a way to make Greece productive. There are very many Greek productive people. Unfortunately, many of them live abroad, especially in the United States. There is entrepreneurship in Greece, theoretically, but it's basically voted with their feet to move abroad.


    Paul Krugman, are these other nations in the Eurozone, especially Germany, are they trying to make Greece an example, for fear of the same sort of instability spreading?


    Well, there is some. That's speculation. We don't really know that.

    It's hard not to suspect that. The main point right now is you have to ask, is there — if your notion is, well, Greek society has always been corrupt, well, you knew that. And it's not — this is an impossible — talk about mission creep, trying to turn this from, let's deal with this financial problem, let's deal with this macroeconomic problem to let's remake Greek society, that's saying that you want Greece out.

    And then, if that actually happens, Europe is going to be very sorry, because the consequences for the whole European system, the consequences for the European project will be terrible. In the end, if Greece leaves the euro, the consequences for the Greeks will be a few months of chaos, but possibly a big gain in competitiveness and recovery.

    Remember, Greece functioned as an economy before there was a euro. The notion that they cannot survive without is wrong. And the folly — I mean, I have no brief for the current government of Greece. They are immature, inexperienced. But compared with the monstrous folly that's been repeated year after year on the part of Europe's leaders, it's nothing. This is an incredible failure of judgment.


    So, should the Eurozone, Stephan Richter, go? Should Greece go from the Eurozone or should the Eurozone just cut Greece loose?


    The tragedy is that the Greek case has shown that in order to for the Eurozone to survive, there needs to be a minimum agreement on fiscal policies, on lots of policies, and the Greek government under any stripe — this is not just a Syriza problem — is outside of that consensus.

    That's the tragedy. In order to preserve the Eurozone, we will see, in all likelihood, a Grexit, unless Mr. Tsipras pulls one more rabbit out of his hat, which is that he comes up with a unity government and can say, this is no longer about politics, we're all in this together. But that's a very low probability. But that's his last card.


    Grexit means Greek exit. I love that.

    But, Paul Krugman, what do you think about that? Is there a rabbit to be pulled out of the hat?


    Well, if we're talking about unity government, Greece has had a series of those, right?

    It has had a consensus. By and large, it has done 90 percent, 95 percent of what the Troika told it to. And the results have been catastrophic. If that's the demand now, that once again Greece sacrifice — the current Greek government sacrifice its own principles, go back on what it promised the electorate, this time it's really going to work, well, I don't think you're going to blame Greece for the consequences, if that what happens.


    Paul Krugman of The New York Times and Stephan Richter of The Globalist, thank you both very much.


    Thank you.


    Thank you.

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