Eurozone crisis explained

Political parties rarely commit suicide. The crisis in Greece, which led to Sunday’s referendum on the terms of a deal with the European Union, was mainly about the survival of Prime Minister Alexis Tsipras’s Syriza Party. But it was also about the electoral future of Germany’s governing party, the Christian Democratic Union.

Almost all of Tsipras’s time since Syriza was swept into power in last January’s election has been devoured by negotiations about Greece’s foreign debt – at 175% of gross domestic product, the highest in the developed world. But the negotiations did not focus on what to do about that staggering burden, which is so big it can never be repaid.

Four-fifths of the money is owed to official European bodies such as the European Central Bank, with a relatively small role for the International Monetary Fund (IMF). But the eurozone authorities just want to kick the can down the road. Why? Because 90% of the money they have lent Greece in successive “bailouts” goes straight back to the German and French banks that financed Greece’s 10-year party on borrowed money.

So Greece got the money, but to justify these bailouts to voters in the richer eurozone countries (who were really footing the bill), the Greeks had to accept severe austerity measures. So severe that the Greek economy has shrunk by a quarter in the past five years and 25% of Greeks are unemployed.

Yet during that time, Greece’s debt has continued to grow.

Greece’s only hope of escape from perpetu- al austerity is a “restructuring” of the debt that writes off as much as half of it.

But Germany and the eurozone’s other big creditor countries will not even discuss that because their own taxpayers would rebel.

So, five months of negotiations about Greece’s debt haven’t even touched on “restructuring” it. They have just been about what new austerity measures Greece must accept to get the last tranche of the last bailout, which would give Athens enough money to pay the loans that are due this summer.

Tsipras was elected on an anti-austerity platform and the left of his own Syriza Party would rebel if he had given in to all the demands for further cuts in Greek government spending. He came close to his “red lines” in June, but would not cross them – and Germany’s Chancellor Angela Merkel still won’t discuss writing off some of Greece’s debt.

So, in the end, Tsipras walked away and called a referendum.

The last eurozone offer, which only crossed Tsipras’s red lines a little, is no longer even on the table, but the referendum asked Greek voters if they would accept it.

The eurozone leaders maintained it was, therefore, a vote on whether Greece wants to leave the euro and, quite likely, the EU as well. But Tsipras insisted a “no” vote would strengthen his hand in another round of negotiations.

The prime minister got the vote he wanted and resounding backing from the battered Greek public.

A referendum win requires 51% of the vote; you can win a Greek election with 35%. Fully 61% of Greeks voted “no”.

Tsipras insisted a “no” vote would strengthen his hand in another round of negotiations. He got the vote he wanted and backing from the battered Greek public