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Greece must be careful on fiscal referendum

By Benard Ayieko | July 4th 2015

 This effectively threw the cash-strapped nation into default. Sensing that this financial calamity was in the horizon, Greece Prime Minister and Syriza leader Alexis Tsipras quipped “it is useless to commit suicide just because you fear death”. Mr Tsipras then made a surprise call for a snap referendum that will be held on Sunday to decide on creditor proposals for reforms largely viewed as a ‘No’ and ‘Yes’ vote for Greece to either exit or remain in the eurozone.

Germany, France and Italy - eurozone’s three biggest countries have warned that a ‘No’ vote being pushed by Tsipras means exit from the single currency and the return of drachma.

But how bad is the situation in Greece? Make no mistake; Greece is on the economic precipice. The crisis is the most serious Europe has faced since signing the Treaty of Rome in 1957. Imagine a situation where restaurants are empty? Queues at ATMs and bank branches filled with people restricted to withdraw a maximum of 60 euros (Sh6,538) regardless of how fat your account is? Would this amount be enough to meet your transactionary motive of demand for money? Would you pay rent? Buy food? Fuel your car? Pay for your holiday? I doubt, worse still banks remain closed.

The tourism sector hangs in the balance. Last year, Greece tourism sector raked in US$32.7 billion representing 17 per cent of the country’s GDP. Though her GDP shrank 25 per cent with youth unemployment estimated at more than 60 per cent, statistics from the tourism sector provides some light in the dark economic tunnel.

 According to the World Travel and Tourism Council, Greece tourism industry contributed 9.4 per cent of the aggregate employment estimated at 340,500 jobs. This was a “coolant” in the heating economy.

Speaking on CNN’s Quest Means Business Emad Boutros, owner and managing director of Boutros Tours shared his fears on the likely side-effects of Greek crisis, what Paul Krugman calls the crisis.

Emad predicts a potential slowdown in the sector and likely cancellation of bookings by holiday makers in the coming weeks citing access to cash and lack of international transactions as the potential reason for withdrawals. The volatility will be caused by the uncertainty of pre and post referendum ramifications.

Greece has endured a 6-year depression partly attributed to the programmes proposed by the “troika” (the European Commission, the European Central Bank and the International MonetaryFund).  With a 60 per cent youth unemployment, many young people think that they have nothing to lose hence their desire to vote ‘No’.

President Obama has already allayed fears of the super power’s exposure. With the fear of political implications on Portugal and Spain in the air, the eurozone will be keen to find a lasting solution to the crisis.

To my Greek friends, it is difficult to advise you on how to vote on Sunday because either outcome is no panacea, no end in itself. Yes or No, each outcome carries heavy risks. If Sunday finds me in Athens, I know how I would vote. What about you?

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