What is happening in Greece is really a tragedy, but it was predictable and self-inflicted. The EU and the eurozone have some very specific requirements for membership. One of them is that the Government of a country must not be spending more than a certain percentage of its tax income (GDP). Also, the Government must be receiving a certain income through taxes, depending on its population. In order to join the EU and then the eurozone the Greek Government at the time lied about both of these amounts. Of course, the EU knew that it was lying, but since they wanted Greece to join and since Greece wanted to join, they both accepted the falsehood. Now the chickens are coming home to roost, so to speak.
Because successive Greek socialist Governments were profligate in paying social benefits to their citizens over many years (2 month vacations, 4 day week, high pensions) and were not vigilant in ensuring that they had the requisite funds to pay for them, the Greek Government built up a huge debt. In order to avoid default, since Greece is a member of the eurozone, they had to apply to the European Central Bank for loans. These loans were given, supported by the main donor Germany, to the tune of at first 26 billion euros, then much more to a total of 130 billion euros. But, in exchange the Greek Government had to introduce harsh austerity measures to try to ensure enough income to eventually cover the cost of the loans. Since the Greek people were not prepared to accept this austerity, there were demonstrations and then an election and the extreme socialist Syriza party was elected under PM Alexis Tzipras.
He tried to renegotiate the terms of the loans and tried to persuade the eurozone members that it would be better for the stability of the euro to discount the Greek debt. But, they were not persuaded and insisted that Greece must repay the loan, the first repayment of 1.6 billion euros came due on June 30. Since Greece does not have the money to repay the loan and since there is no other source to obtain further loans (the IMF declined), it was clear that Greece would default and would in effect go bankrupt.
In order to avoid this scenario Tzipras made a desperate move, he declared a referendum of the Greek people for July 7 on the question of whether or not Greece should accede to the demands of the eurozone finance ministers or reject their austerity and repayment demands. But, then in a puzzling turnaround, Tzipras issued a conciliatory statement suggesting a compromise with the eurozone committee. Then he contradicted himself and asked the electorate to vote “No.” A No vote would mean in effect that Greece will be in default, will almost certainly be forced to leave the eurozone and then will be on its own financially. They would have to reintroduce the drachma in place of the euro and since this currency will have no financial backing it will collapse and so will the Greek economy. Greece may also be forced to leave the EU.
Because the Greek government has no money, Tzipras was forced to close the banks and to limit the amount that anyone can withdraw. Because Greece defaulted on the terms of the loan, the eurozone is now requesting Greece to pay back the total 130 billion euros. So now the Greeks are really feeling the results of austerity, which they could have avoided if they had paid their taxes for many years or had accepted the terms of the eurozone bailout. Instead they voted in another socialist government that simply cannot come to terms with the reality of their situation. According to an IMF estimate the size of the Greek debt is actually ca. 350 billion euros. There is no way now out of this mess, Greece will go bankrupt and the austerity will get much worse. By the way, Greece is one of the most anti-Semitic countries in Europe and of course many Greeks blame “the Jews” for their economic situation (very convenient). Instead of being anti-Semitic they should have emulated Israel, which is a similar size and has avoided these economic woes.