All the brinkmanship notwithstanding, a Grexit was not really an option for Greece or the European Union. A forced exit or pullout would have weakened the eurozone leaders’ political will and commitment to keep the union intact in the days and years to come — after all, any system is only as strong as its weakest link. An exit might have prompted Italy, Portugal or Spain at some point in the future to consider a similar option, jeopardising the idea of a united and economically stable Europe. After 17 hours of marathon talks, therefore, when the European Council announced early Monday morning that a unanimous agreement had been reached — indicating that a third bailout for Greece is “ready to go” under the European Stability Mechanism — it raised hopes that Greek Prime Minister Alexis Tsipras will now convince his radical Left party to come to terms with some serious reforms. These must include a restructuring of the country’s pension system and an across-the-board increase in sales tax.
While it is true that throwing in the towel in times of distress sets a bad example for others and Greece must mend its ways, it is also incumbent on the creditors or lenders to hold back from inflicting humiliation on a sovereign borrower. This is perhaps what pushed Yanis Varoufakis, a game theorist, and Tsipras to force a referendum on the nation. Initial surveys suggested the people would vote against an exit, but a “no” vote eventually helped the Left government convey the mood of the nation to creditors and extract a better deal. If the European Council had not budged, it is certain Greece would have plunged into a dark tunnel with no immediate promise of light. Possibly, a devalued drachma would have been the currency again, with sterner spells of capital control inflicting a long-drawn slowdown. But that was not to be. The finer details of the bailout are being thrashed out, but it looks certain that Greece will get more time to repay the 3.5 billion euro due in a week. This itself helped Asian stocks rally and the euro to stabilise in morning trade.
The stockmarket in India, which has limited or no exposure to Greece, also opened strong and the BSE Sensex gained 300 points to close 1 per cent higher. What markets hate most is uncertainty. At a time when there is a scramble for any positive information pointing to some greenshoots of a global recovery, any indication of stability is lapped up by the developed world and emerging economies alike. A Grexit would have affected India’s exports, which are already down 17 per cent in the first two months of this financial year. Exports may not jump now, but brighter prospects will perk up the economies in a world becoming more and more interlinked.