July 06 ,2015 | by Hari Sri

Greek referendum: global markets feel impact as Greece rejects austerity

Greek referendum

Global markets are readjusting following after the Greek referendum on the terms of its proposed bailout led to a resounding rejection of further austerity measures in the country.

The nation went to the polls yesterday (5 July) in a referendum called by the leftist Syriza government to decide whether or not to accept austerity proposals from the country's creditors - including the European Central Bank (ECB) and the International Monetary Fund (IMF) - that had been set out as preconditions for any further bailouts for the debt-stricken nation.

Despite the fact that Greece's government defaulted on a loan from the IMF last week, the populace have voted decisively against allowing the mandated economic reforms to take place, with 61.31 per cent of the electorate rejecting the proposal, compared to only 38.69 per cent voting in favour.

The IMF was non-committal over its response to the outcome of the vote, with a statement from Christine Lagarde, managing director of the IMF, saying: "We are monitoring the situation closely and stand ready to assist Greece if requested to do so."

Global stock markets register drops

However, the political and economic fallout of the historic result is already under way. US, European and Asian stock markets all fell, albeit to a less extreme degree than had been expected, as the prospect of Greece leaving the euro continues to look more likely than ever.

A general selloff in global equities is widely expected, with European leaders now looking to regroup and devise a new proposal in order to alleviate the severe economic strife that Greece continues to experience and to safeguard the future of the European single currency.

Valdis Dombrovskis, the European commissioner for economic and monetary affairs and the euro, said the result "widens the gap between Greece and other eurozone countries".

Finance Minister Yanis Varoufakis resigns

Meanwhile, Greek finance minister Yanis Varoufakis has resigned from his post, despite voters backing his anti-austerity stance.

Mr Varoufakis explained on his personal blog that he has taken this step to make it easier for prime minister Alexis Tsipras to reach a resolution with Europe, with Euclid Tsakalotos set to succeed him.

 

Pic: John D Carnessiotis

Hari Sri

Hari is the LSBF Blog's News Editor. He manages the editorial content on the blog and writes about current affairs, SME, entrepreneurship, energy, education and emerging market news.

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