Given the world's inequities, global referendums are impossible
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Putting yourself in Greek shoes, how would you vote in next Sunday's referendum?
It’s a tough question. The Greeks are being asked to vote on the government’s bail-out counter-offer, which differs from that proposed by the European Central Bank, its key lender. Prime Minister Alexis Tsipras is saying the country can endure no more reforms in exchange for further EU assistance. Greece’s creditors were stunned, and remain reluctant to advance more money if the borrower refuses to keep tightening its belt to ensure that debt obligations are honoured. An majority no vote in the referendum could see Greece exit from the euro zone, with all of its attendant reverberations around the world. It is understandable that many Greeks, who have withstood shortages in goods for five years, are prepared to back Tsipras’ counterproposal. They are well aware that abandoning the euro and returning to the drachma would have painful consequences, but then they are already in pain. They are braced for a sharp devaluation of the old drachma, newly reintroduced, resting their hopes on a subsequent surge in exports and tourism income.
Other Greeks, though, believe that staying in the euro zone will yield more benefits in the long term. Their products enjoy special trade privileges among other member countries and, in times of trouble, they can seek help from the rest, as they did in 2013 to the tune of 200 billion euro. More importantly still, outside oversight is desirable in a country with more than 20 political parties promising all sorts of short-term panaceas if elected to power, heedless of the cost.
And how would the world vote in a referendum on Greece? Fear of a “Grexit” has haunted financial markets for years. When negotiations over the most recent bail-out package heated up, stock markets grew more rattled by the day, including in Thailand, where brokerage houses specifically cited the Greek crisis as a reason the local stock exchange slowed last week. Exports to the 27-nation European Union have already nosedived, not a good sign when exports within Southeast Asia are also falling.
Economists initially fretted that Greece’s exit from the euro zone would lower the euro’s viability and shake confidence in the economies reliant on the currency. Such a setback for the EU would only mean a more dominant dollar. Over time these fears have been discounted. The euro’s value has declined not because of the Greek problem but because of the quality of EU banking. The US dollar has indeed become sturdier, and 1:1 parity in the dollar/euro exchange rate is expected soon. Thailand’s euro-based trade could be in trouble, given that the baht has strengthened by about 14 per cent against the euro in the past 12 months.
If there were a global referendum on whether Greece should quit the euro zone, Kobsidthi Silpachai, head of markets and economic research at Kasikornbank, would likely vote yes, let them go. Thailand’s own experience in the late 1990s ought to serve as a lesson for Greece, he has said. It gained economic freedom by un-pegging the baht from the dollar. The economy suffered at first, but exports and tourism soon filled the gap in national revenue.
Another yes vote would come from Plaiphol Khumsap, a former member of the Bank of Thailand’s Monetary Policy Committee. “For a weak economy, a weak currency is a must,” he said at a recent Kasikornbank seminar. “In a strong economy, the currency will naturally rise.”
Plaiphol believes a Grexit would weaken the drachma, but exports and tourism would benefit as a result. And meanwhile the euro zone would thrive.
In favour of keeping Greece in the EU, the United Overseas Bank has warned that the ramifications of a Greek default would be severe. In a commentary issued days before the Greek referendum was announced, it said that, for political reasons, it would be in Europe’s interest to hold on to Greece.
The UOB insists that neither outcome in the referendum is likely to lead to an easy resolution for the Greeks. A yes vote would be a major defeat for Tsipras’ left-wing Syriza government, perhaps triggering his resignation, a call for fresh elections and a switch to coalition rule. A no vote wouldn’t automatically lead to the Grexit, but rather force Greece to decide whether it should reopen negotiations or reintroduce the drachma, since its financial options are limited. If Greece did have to print its own currency again, it would amount to an exit, as well as heralding an extended period of uncertainty, given that other EU nations might follow suit.
For now, a speculative nightmare has descended on Greece. Since Sunday no one has been able to withdraw money from ATMs. The banks have been ordered closed until the day after the referendum. Capital controls have been imposed on nationals, though not on expatriates. Many citizens have become frantic. Two decades ago it would have been unimaginable that domestic tumult in any country could have such a widespread impact. But, despite the interconnectedness of the modern world, the power to solve domestic issues remains entirely in the hands of a given country’s citizens.
The rest of us can only watch what the Greeks do next. If there were a global referendum on violence in the Middle East, in which the majority condemned the bloodshed, would it ease at all? Perhaps it’s too late for such wishful thinking now that terrorism has spread so far. Access to information remains far from equal on this planet, rendering any effort to intervene impossible.
