Greece pushes global economy into cul-de-sac

Professor Fabrizio Carmignani says a default would impact on Greece's economy and its society.
Professor Fabrizio Carmignani says the global community is being cornered by the actions of the Greek Prime Minister.

The global community is being ‘cornered’ by the actions of Greek Prime Minister Alexis Tsipras, says Griffith University Professor of Economics, Fabrizio Carmignani.

“We are moving towards a cul-de-sac situation. Tsipras is gambling with his own country and he is gambling with Europe,” Professor Carmignani says.

Alexis Tsipras has urged Greeks to reject the terms of a compromise deal with international creditors in a July 5 referendum, as negotiations between the Greek government and the EU and IMF appeared to hit a brick wall.

“The fact that Greek citizens are running to the banks for cash is a sign of the fear and uncertainty that has been generated by Tsipras’ negotiations,” Professor Carmignani, Head of the Department of Accounting, Finance and Economics, said.

“While the creditors have compromised with their latest proposals, Tsipras has created panic and uncertainty and has adversely impacted on stock markets by rejecting the proposals.


“A ‘No’ vote in the referendum would be a disaster. A ‘Yes’ vote would be slightly less of a disaster.

“If there is a ‘No’ vote, then Tsipras believes he will have a strong bargaining position. But it’s a gamble because a ‘No’ vote is more likely to lead to a default and then we all step into unexplored territory.

“If it’s a ‘Yes’ vote then the Greek Prime Minister should probably resign which creates a political stalemate and the need for another election. It would be a very bad time for an election because right now it’s a time for decisions.”

Professor Carmignani, an Italian native, also questioned if commentators and the wider community are appropriately informed about the details of the compromise proposals.

“There is a lot of rhetoric about austerity surrounding the compromise that the creditors have offered Greece. While the Greek government has rejected it as unreasonable, I don’t think a lot of commentators have read the document. It is areasonable document addressing clear fiscal issues; it cannot be labelled as a new austerity package because there are no austerity measures in there.

“There are measures to discourage early retirement in Greece, which is a good move; there are proposals to rationalise VAT but with a discount rate for necessities like food, water, energy and medicine.”


Professor Carmignani suggests the Greek Prime Minister has neglected the principles of representative democracy by referring the people of Greece to a referendum rather than taking responsibility.

“The question being asked in the referendum is not a straightforward question like ‘Do you want to stay in the European Union?’ Instead, the people of Greece are being asked if they accept the proposals put forward by the creditors.

“These are technical proposals. The government of Greece has been elected to take care of this type of issue. There is not enough time to campaign, discuss and explain the detail of the document and the proposals. People are likely to vote based on biased summaries — one way or the other — that are presented in the media.”