This great piece in Foreign Policy lays out just what horrible options are in front of the Greek people:
Option 1: Take the Deal:
Almost half of the 100 billion euros to be written down is held by Greek banks and pension funds. In fact, Athens would have to borrow 30 billion euros from its eurozone partners to recapitalize its banks, at an interest rate of about 4 percent. Under the terms proposed in Brussels last week, another 30 billion euros would have to be provided by Greece to foreign banks as incentives to voluntarily accept a 50 percent loss, or haircut, on the Greek bonds they hold. Basically, Greece would have to borrow 60 billion euros to save 100 billion euros. Given that the Greek debt pile is now roughly 350 billion euros, it seems what Greece’s European partners are proposing is hardly a panacea for its problems.
What worries average Greeks much more are the measures the government will have to adopt to please the eurozone and the IMF so that a steady supply of loans keeps coming. The last two years have seen unprecedented levels of austerity adopted in Greece as it tries to bring down its large public deficit. The measures have included pay cuts of at least 30 percent in the public sector and a substantial increase in taxes, including an emergency levy on property, that has seen the average Greek’s bill increase by some 2,500 euros just this year. Along with the recession, which is set to complete a third year, the spending cuts and tax hikes have had a devastating effect on Greek society. Unemployment has passed 17 percent and is still rising, hundreds of businesses are closing each week and ordinary families are finding it near impossible to meet all their financial commitments.
Option 2: Reject the Deal:
Voting no, Papandreou argues, would open a dangerous and destructive path to the drachma. There are fears that an exit from the euro would collapse the Greek banking system and make key imports, such as fuel, so expensive that the economy would not function properly.
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