Since a report on the Greek political and economic situation last Friday, several of Greeks’ fears have been realized: there was no agreement between the country and its creditors, Greece failed to make a loan payment to the International Monetary Fund (IMF) which was due June 30, the European Central Bank (ECB) stopped propping up Greek banks, and as a result capital controls were introduced throughout Greece. Most surprisingly, very early on the morning of June 27, Prime Minister Alexis Tsipras announced a referendum for July 5 in which Greeks will vote on whether or not to accept the creditors’ June 25 proposal of loans in exchange for additional austerity and reforms. However, since the bailout agreement expired June 30, Greeks will vote on a proposal many European leaders say is no longer on the table.
The coalition government of the left-wing SYRIZA party and the right-wing nationalist ANEL party calls for a No vote as a rejection of punishing austerity that has not improved the country’s situation, claiming that a No would improve its negotiating position in relation to creditors, offering hope rather than additional austerity, while asserting Greeks’ democratic right to decide their fate. Those who call for a Yes vote (including the centrist Greek opposition and most European leaders) claim that it is necessary to agree to work with creditors in order to keep Greece in the Eurozone, arguing that a No vote would not improve Greece’s bargaining position, but would likely lead to a return to the drachma and create even worse economic hardship in Greece.
The country is sharply divided, with recent polls leaving the outcome uncertain. The supporters of a No, or Ohi, vote echo calls for the patriotic pride and self-determination that is celebrated on Ohi Day each October in a recognition of Prime Minister Ioannis Metaxas’s refusal to permit Mussolini’s troops free passage through Greece during World War II — a refusal that initiated a period of strong resistance to fascism, and then severe suffering in the nation.
During last week’s talks, negotiators reported progress, but meetings were abruptly halted after the prime minister’s unexpected announcement. Lines immediately formed at cash machines throughout Greece, some of which ran out of money in the middle of the night. Since then, the lines have continued, except when ATMs run out of cash. Before the imposition of capital controls on Monday, which include a withdrawal limit of €60 per account per day and restrictions on transfers of money outside of Greece, Greeks attempted to withdraw as much cash as they could trying to stock up on essentials.
Since Monday, Greeks have simply been trying to get enough money to carry on. Visitors to Greece should note that withdrawal limits do not apply to foreign account holders, who are free to withdraw whatever their bank allows, provided they can find an ATM with sufficient cash.
Got a few minutes?
Try this week's crossword.
The European Commission (EC) offered Greece another reform-for-loans proposal last Sunday. On Tuesday, the prime minister sent a letter to the leaders of the EC, the ECB, and the IMF stating that Greece was prepared to accept that proposal, with some modifications, as part of an extension of the expiring bailout program, and along with a new loan Greece also requested from the European Stability Mechanism that day. The requests were denied, with German Chancellor Angela Merkel and others saying negotiations cannot continue until after the referendum.
On Wednesday, certain banks opened to provide pensioners with just €120 of their pensions. The Prime Minister urged Greeks to vote No on the referendum. A European finance ministers’ meeting the same day ended without any agreement. On Thursday the IMF released a report that both implicitly blamed the worsening state of Greece’s economy on the current government’s policies and explicitly emphasized that the country will need debt relief and more loans in the coming years.
While Greece did not pay the €1.6 billion due to the IMF on Tuesday, it was not technically in default since the IMF is not a private lender. The country has also requested an extension of its time to pay. However, Reuters reports that the chief executive of the European Financial Stability Facility announced today that it reserved the right to demand early repayment of the 130.9 billion euros Greece owes it, since the country’s failure to make the payment due to the IMF last Tuesday allows it to do so. Meanwhile, the head of the Hellenic Banking Association does not guarantee that Greek banks will have liquidity after Monday morning.
In Crete, shortages are not yet visible, since a lack of sufficient gasoline earlier in the week was resolved. But according to Jeff Daniels of CNBC, bank closures and political uncertainties have created problems for many Greek farmers and exporters. Many companies now insist on cash payments, and with cash scarce, imported fertilizers, pesticides, and fuel are likely to become difficult to procure. Still, one American importer said there had been no problem with imports from Greece so far.
Nikos Michelakis, Scientific Advisor of SEDIK, the Association of Cretan Olive Municipalities, told Olive Oil Times that the referendum announcement and bank holiday stopped bulk olive oil transactions, both because producers prefer to hold onto their oil (considering it a more stable, valuable currency than any other now available), and since olive oil traders do not have access to the cash needed to make purchases. However, bottled and branded olive oil exports abroad continue as usual, and Michelakis expects Crete to produce about 105,000 metric tons of olive oil this year.
Michelakis points out that Cretans traditionally viewed olive oil as a currency as good as gold, a belief supported by its contributions to survival during the famines of World War II.
Yiorgos Dimitriadis, the producer of Biolea, wrote in an email that many different currencies “have come and gone in the 6,000-year life of olive oil,” while “olive oil itself is value in its purest form,” able to replace cash, as it has several times. The Dimitriadis family here in Crete creates “such value by raising the olive tree with our labor; we know that when the rains come, we shall go back and pick our olives one more time. Olive oil has bought gold, silver, precious stones, dollars and Euros time and time again.” Whatever the outcome, this crisis will not vanquish the olive groves.