Right up to today’s vote relentless pressure has been exerted by the Eurozone leaders (Merkel, German), the IMF (Lagarde, French), the World Bank ( Zoellick, American), and the EU outsiders (Cameron-Osborne) to bully the Greek electorate into accepting draconian, humiliating and ultimately self-defeating conditions for a bailout to remain within the eurozone.   The Greek public have persistently been told that failure to do so would not only be worse for them (however onerous the penalties), but could also lead to the collapse of the euro and (Zoellick yesterday) there could be a “Lehmans moment” producing a global crisis with dire consequences for developing nations.   It is vastly overblown and highly misleading.   The Greeks may well see through this false dilemma and vote for Tsipras’ anti-bailout party, Syriza, which could well then (given the ripple impact across the whole Eurozone) force a determined attempt to restructure the euro which is long overdue. 

Greek electors have a strong incentive to face down constant barrage of intimidation directed at them over the last two months.   Their present unemployment rate is 21%, and already there has been a 30% wage cut imposed under austerity measures so far.   In addition there are at least 15% wage cuts still to come.   The cost of the bailout so far works out at an average of €20,000 per Greek citizen.   And the average current Greek salary has now fallen as low as €800 per month.  

The fundamental reason why the Greeks should reject the Eurozone package being forced upon them is that it is so harshly onerous that it can’t work.   The debt repayments demanded are so huge and so destructive of aggregate demand that it will be impossible to mount the growth policy which is the only sustainable way to pay off the debts.  

The obvious way out of this impasse is a renegotiation of the bailout terms which provides for repayment conditions which, though still tough and demanding, are nevertheless practicable and manageable.   Merkel, who remains the real culprit in this avoidable tragedy, has once again flatly ruled this out.   Even then there is a way out so long as Mrs. Merkel is not hidebound by an absolutely rigid and inflexible monetarist model of how to run Europe.   She remains, foolishly, opposed to a full Eurobond solution, but that still does not rule out a proposal put forward by her own country’s Council of Economic Experts, namely to mutualise the debts of all eurozone economies above 60% of their GDP.   The new mutualised-bond market, which might be worth €2.3 trillions, could then be paid off over the next 25 years.

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