Greece PM called for referendum on extension for bailout programme

Greek Prime Minister Alexia Tsipras on 27 June 2015 called a referendum on extension to the bailout programme offered by the troika viz., International Monetary Fund (IMF), the European Commission (EC) and European Central Bank (ECB).

The Greece Parliament is set to vote on 5 July 2015 on the referendum call.

Tsipras called for referendum against the backdrop of austerity demands put forward by the lenders as a pre-condition to extend the bailout programme for six months. It is set to expire on 30 June 2015, the same day IMF’s debt is due.

As per the troika, Greece needs to raise its primary surplus within two years in order to avail the 15.5 billion euros of funding, which in turn requires pension and tax reforms for which the Syriza government is reluctant to.

The left-wing government came into power in January 2015 on a promise to end austerity measures.

Without the bailout funds, Greece is set to default on the loans and will be closer to imposing capital controls that will create chaos in the economy and financial markets.

If people vote for the extension of the bailout programme (Yes vote), a new government may have to be formed to finalise talks with the lenders and implement reforms agreed upon.

If people vote against the extension of the bailout programmes (No vote), it will pave the way for the exit of Greece from the Eurozone and possibly European Union.

Greece, which has been facing financial crisis since 2009, has a total debt of 320 billion euros. This is 180 percent of Greece GDP and 2 percent of the sovereign debt in  the European Union.

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