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Why Iran Wants a Nuclear Deal

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1. Here’s the real reason Iran wants a nuclear deal.

By Kathy Gilsinan in the Atlantic

2. We need a Marshall Plan for the victims of America’s War on Drugs.

By Nancy Gertner at the Aspen Ideas Festival

3. Investors and entrepreneurs are getting creative to weather Greece’s crumbling economy.

By Elmira Bayrasli in TechCrunch

4. We need a partner to stabilize Afghanistan. India is right for the job.

By Alyssa Ayres at the Council on Foreign Relations

5. Though a cleaner source of power, hydroelectric dams drastically slash biodiversity.

By the University of East Anglia

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TIME Greece

Poll Shows Even Split Ahead of Greek Referendum

The survey shows 41.5% will vote "Yes" and 40.2% will vote "No"

(ATHENS, Greece) —The brief but intense campaign in Greece’s critical bailout referendum ends Friday, with simultaneous rallies in Athens for “Yes” and “No” supporters in what an opinion poll shows will be a very close race.

The poll published in To Ethnos newspaper showed the “Yes” campaign slightly in the lead but well within the margin of error. It also showed an overwhelming majority — 74 percent — want the country to remain in Europe’s joint currency, the euro, compared to 15 percent who want a national currency.

Prime Minister Alexis Tsipras called the referendum last weekend, asking Greeks to decide whether they should accept creditor reform proposals in return for vitally needed bailout funds. He is advocating a “No” vote on Sunday.

But those proposals are no longer on the table after negotiations with European creditors broke down last weekend and Greece’s bailout expired on Tuesday, meaning the country no longer has access to the rescue loans.

The “Yes” campaign says the referendum is in fact a vote on whether Greece wants to remain in the euro and in Europe. The government rejects this as scaremongering, saying a “No” vote will put it in a better bargaining position and will not lead Greece to leave the eurozone.

The survey conducted by ALCO found 41.5 percent will vote “Yes” on Sunday and 40.2 percent saying they will vote “No,” with 10.9 percent undecided. The rest said they would abstain or leave their ballots blank.

When discounting those who say they will case blank ballots or abstain, those intending to vote “Yes” came to 44.8 percent compared to 43.4 percent who will vote “No” and 11.8 percent undecided.

The survey interviewed 1,000 people nationwide on June 30-July 1 and has a margin of error of 3.1 percent.

The referendum campaign will wrap up Friday evening with rallies by the two sides, to be held 800 meters (875 yards) apart in central Athens. Tsipras is set to speak at the “No” rally in the capital’s main Syntagma Square outside Parliament, while the “Yes” rally will be held at the nearby Panathenian Stadium, where the first modern Olympics were held in 1894.

The vote is set to be one of the most important in Greece’s modern history, but many voters are confused about what’s at stake. The government vehemently denies a “No” vote would force the country out of the euro, but most opposition parties and many European officials have said this could be the case.

“The referendum is unclear in the way it is being phrased, so I interpret this ambiguity as meaning we might stay in Europe or not,” said Apostolos Foutsitzis, a 43-year-old medical scanner operator in the northern city of Thessaloniki. He said he will vote “Yes” because he wants Greece to remain in Europe.

Much of the ambiguity arises from the complicated question that will be printed on the ballot paper.

Greeks are being asked to reply to the following question:

“Must the agreement plan be accepted which was submitted by the European Commission, the European Central Bank and the International Monetary Fund to the Eurogroup of 25 June 2015 and is comprised of two parts which make up their joint proposal?

“The first document is titled ‘reforms for the completion of the current program and beyond’ and the second ‘Preliminary debt sustainability analysis’.”

Then voters are asked to tick either the “not approved/no” box, which is placed above the “approved/yes” box.

The Council of State, the country’s highest administrative court, is to rule Friday on a motion brought by two private citizens asking the court to rule the referendum illegal.

The vote comes after a week of bank closures, with Greeks restricted to daily withdrawals of 60 euros ($67) — although in practice this has been reduced to 50 euros as most automatic teller machines have run out of 20 euro notes.

Some banks have been opened to allow pensioners without ATM cards withdraw a maximum 120 euros for the week, with crowds of elderly people waiting outside the doors for hours to get inside.

Capital controls were imposed on Monday to staunch the hemorrhaging of funds from the country’s lenders as worried Greeks rushed to ATM machines after Tsipras’ referendum announcement last weekend.

“Our efforts are focused on overcoming the crisis as fast as possible — with a solution that preserves the dignity and sovereignty of our people,” Tsipras said Thursday.

The popular 40-year-old prime minister argues a strong “No” vote will help Greece win a new deal with the eurozone’s rescue mechanism that would include terms to make the country’s 320 billion euro national debt sustainable.

He insisted a deal could be struck “within 48 hours” of the vote.

His argument, however, was dismissed by the head of the eurozone finance ministers’ group, Dutch Finance Minister Jeroen Dijsselbloem.

“That suggestion is simply wrong,” Dijsselbloem told lawmakers in the Netherlands.

European officials and the Greek opposition have warned a “No” outcome Sunday could be tantamount to a decision to leave the euro.

“The consequences are not the same if it’s a ‘Yes’ or ‘No,'” French President Francois Hollande said.

“If it’s the ‘Yes,’ even if it’s on the basis of proposals that have already expired, negotiations can resume and I imagine be quickly concluded,” he said. “We are in something of an unknown. It’s up to the Greeks to respond.”

TIME Greece

New York’s Greek Community Shares the Pain of Bailout Crisis

"Whatever they feel, I feel it too"

With Greece now technically in default of its debts to the International Monetary Fund, voters there are preparing to cast their ballots in a referendum where the future of the country is at stake. Do they vote ‘Yes’ to support accepting a bailout plan from Greece’s creditors, and potentially condemn themselves to yet more spending cuts and tax hikes? Or do they vote ‘No’ and face the prospect of Greece leaving the eurozone?

The weight of that decision is being felt far beyond Greece’s shores, all the way to the neighborhood of Astoria in New York City, where the significant Greek and Greek-American population has been monitoring the developments from afar.

Frances Petradellis says that the “Second Athens” of Astoria is gripped by the crisis, despite being thousands of miles away. The 46-year-old, who moved from Greece to Astoria in 1976, said she hasn’t made her mind up which way she wants to vote to go. “Obviously we don’t want [Greece] to default. But sometimes you have to not give in.”

But others in Astoria are sure that a ‘no’ vote would give Greece time to recover from five years of austerity imposed by its creditors. “Greece needs 10 years just to normalize, forget grow,” said George Patrikis, 28, a first-generation Greek- American who works in Ditmas Flowers & Gifts with his brother Bill. “The whole economy has to change. The country has to change.”

For that to happen, he says, Greece must leave the eurozone — no matter the potentially dire consequences to the global economy. Patrikis says that although he does not absolve Greece from blame, he feels the conditions of the so-called “Troika” of the IMF, the European Central Bank and European Commission have been excessively punitive. “At this point, Europe is screwing Greece over,” he says.

Some earlier immigrants to the U.S. believe a yes vote is inevitable. George Katsihtis and Nicolas Makrides, who have each been in the U.S. for decades, told TIME they thought Greece would likely vote to accept the bailout terms out of financial necessity. “The majority of people don’t want to lose the little money they’re getting every month,” said Makridis, 55.

Katsihtis, who moved from Greece in 1967 and owns The Neptune Diner in Astoria, said he would prefer Greek and its creditors to reach a fair compromise than a vote in which neither result is favorable. “If they vote ‘no’ now, we’ll go back to 1950,” he said, but added he remains “in-between” because Europe is already squeezing Greece a lot. “From here, we can see things much better.”

Despite the distance the crisis can seem close to home, though — especially to the Greek-Americans who have family still there. Konstantinos Daniil, 31, the working manager at Taverna Kyclades, says his retired father in Athens didn’t receive any pension this month, and his sister didn’t receive her most recent wages. He shares their pain and anger, he said. “Whatever they feel, I feel it too.”

As for the referendum, Daniil is hopeful that no matter Sunday’s result, the country will have “better days” ahead. “We say in Greece, if you fall down, you’ll get back up again,” said Daniil, adding: “Hopefully.”

TIME Greece

Everything to Know About Greece’s Debt Vote

It could have serious consequences for Europe's future

Q. Why and when are the Greeks voting on this referendum?

A. The Greek government called the referendum because it failed to get acceptable terms for debt relief and further assistance in four months of negotiations with the creditors. It felt it couldn’t agree to the last set of proposals received before the expiry of its bailout, because they couldn’t square it with their election promise to end austerity.

The referendum will be on Sunday, 5th July.

Q. So what are the Greeks actually being asked to vote on?

A. They’re being asked to vote on a set of proposals drafted by IMF, ECB and European Commission officials that were never formally completed or published.

This is the actual ballot. As you can see, the “No” (OXI) option, recommended by the government, is above the “Yes” (NAI) option.

Screen Shot 2015-07-02 at 16.14.12

For the non-Greek readers, (or for those who only know ancient Greek), here’s a translation:

Screen Shot 2015-07-02 at 16.18.50

The two documents referred to can be found here and here (debt sustainability analysis).

Q. What are the key points?

A. The most contentious demand is that Greece squeeze another 1% of GDP in savings out of its battered pension system, specifically by eliminating top-ups that have been desperately needed by poorer pensioners to keep themselves above the breadline in recent years. The other big point is the elimination of VAT exemptions for Greece’s islands. The government argues this threatens the existence of the tourism industry on the islands.

The DSA, meanwhile, almost–but not quite–brings itself to admit that the debt load is unsustainable. If Greece adopts and implements the conditions immediately, it says, then the debt-to-GDP ratio could fall to 124% by 2022 from over 175% right now. That’s the best case scenario, and not one that sits comfortably with the last five years’ experience. It’s also not many people’s idea of sustainability.

Q. What happens if Greece votes ‘Yes’?

A. A ‘Yes’ vote would be the first step towards a third bailout agreement for Greece (the IMF suggested today that Greece will need €50 billion, or $56 billion, in financing to get it through to the end of 2018, as well as a 20-year grace period). The last one expired Tuesday.

Q. Could the Greek government collapse?

A. Probably. It has campaigned for a ‘No’ vote, so the blow to its credibility would be huge. Its electoral mandate–to end austerity while keeping the euro–would be obsolete. Individual ministers have already said they’ll resign in that event. However, the radical left-wing Syriza party is by far the largest in parliament, a large part of its lawmakers won’t sign any new bailout deal, and there is no stable pro-bailout majority without it. That points to new elections. Quite how negotiations could resume, and quite how the banks could reopen, in those circumstances isn’t clear.

Q. If Greece votes ‘No’, what happens?

A. Prime Minister Alexis Tsipras claims that a ‘No’ vote will strengthen the Greeks’ negotiating position by showing the strength of resistance to further austerity. However, the creditors have shown no sign that it would change their position. More likely is that the continued uncertainty will make it impossible for the banks, which have been closed since Monday, to reopen. They would be immediately faced with demands for cash that they can’t possibly meet. In practical terms, the banks couldn’t open again until the bulk of their liabilities–i.e. customer deposits–had been re-denominated in a new Greek currency. This would lead to a large part of the country’s savings being wiped out.

Q. Could this vote result in Greece leaving the Eurozone?

A. Absolutely, because it would be clear that the political will to share a currency with Germany and others was no longer there. How we get from A. to B. is unclear, because there are no precedents and no provisions for it in the E.U.’s treaty. There is a provision for leaving the E.U., but not even Tsipras wants to do that.

Q. Is the bailout deal they’re voting on even still on the table?

A. Not officially, but the creditors will look stupid, merciless and irresponsible if they don’t react to a ‘Yes’ vote with something to relieve the immediate pressure on Greece’s banks and the economy at large, and a large part of the political dynamic in this process is about dodging blame for the whole mess. It’s tempting to think that, once Syriza is out of government, some form of debt restructuring will become politically possible. The creditors would rather eat dirt than reward a party, and individual ministers, that they regard as dangerous charlatans.

Q. What does this mean for the global economy?

A. A ‘Yes’ vote would remove one of the big geopolitical risks that are currently holding back investment in the Eurozone, which would be a clear bonus to global growth (the Eurozone is over two-thirds of the E.U. economy, which about 20% of world GDP).

A ‘No’ vote, could have quite mild consequences if Greece can be kept inside the Eurozone and the ECB douses the flames of market fear with a flood of liquidity. That wouldn’t be as good for the economy, but it would at least contain the damage to financial markets. But a ‘No’ vote that leads to “Grexit” is another matter. Again, one would expect the ECB to throw money at the markets to keep volatility down, but the sight of European integration going into reverse would nix a basic geopolitical assumption of the last 60 years. The resulting political uncertainty could be highly damaging for investment not only in Europe, but also further afield.


TIME Greece

Battle for Greek Votes Under Way as Cash Shortages Bite

Prime Minister Alexis Tsipras wants Greeks to vote 'no'

ATHENS, Greece (AP) — The battle for Greek votes was in full swing Thursday ahead of a crucial weekend referendum that could decide whether the country falls out of the euro. For Greeks, particularly the elderly, the daily struggle to get cash ground on in the face of massive uncertainty.

Greece’s creditors have halted any negotiations on a new financial rescue program until after the popular vote on whether to accept proposed reforms in exchange for bailout loans.

Greek Prime Minister Alexis Tsipras has staunchly advocated a “no,” saying it would put the country in a stronger negotiating position with creditors. But European officials and the Greek opposition have warned such an outcome could be tantamount to a decision to leave the euro.

Until then, the country remains in limbo, with banks mostly shut and strict cash withdrawal limits imposed until after the vote.

Crowds of elderly Greeks, some struggling with walking sticks or being held up by others, thronged the few banks opened to help pensioners without debit or credit cards withdraw at least some money.

The banks shut down on Monday to prevent remaining funds fleeing after Tsipras announced he was calling the referendum.

Greeks are now restricted to a daily withdrawals of 60 euros ($67), although in practice this has become 50 euros for many as large numbers of ATMs have run out of 20 euro notes.

Pensioners without bank cards are being allowed to withdraw a maximum 120 euros for the week from open bank branches.

“All I know is that that we are all going crazy here,” said Anisia Kaklamanou, one of those waiting to get into a bank in central Athens. “And I don’t know what to do on Sunday: vote “yes”, vote “no”. I don’t know. All I know is that I have 120 euros to get by until whenever the banks open.”

The question on Sunday’s ballot is whether they accept or reject a reform proposal made by creditors during negotiations last week.

But that particular proposal is no longer on the table. It was amended later in the week and has now been rendered moot by the fact that Greece’s international bailout expired Tuesday. The same day, the country also became the first developed nation to miss a debt repayment to the International Monetary Fund.

The country is now seeking a different deal with its European creditors. But European officials have said they cannot negotiate with Athens until after Sunday’s vote.

The head of the eurozone finance ministers’ group, Jeroen Dijsselbloem, says it will be “incredibly difficult” to build a new bailout package for Greece if the country votes “no” in Sunday’s referendum.

He raised questions about the new government’s ability to continue talks in such a case and rejected the Greek government’s argument that it might get a stronger bargaining position in case of a ‘no’ vote.

“That suggestion is simply wrong,” Dijsselbloem told lawmakers in the Netherlands.

Some European officials have said the Greek referendum amounts to a vote on whether to stay in the euro. The Greek government says that is merely an attempt to terrorize the people into voting in favor of destructive austerity policies.

Many Greeks say they will be casting their ballots to end the budget cuts and tax increases imposed in return for bailout loans from other eurozone countries and the IMF.

“We’ve been going through this crisis over the last five years and we had nothing to eat, our pensions and our wages have been slashed and some made a profit off us,” said pensioner Koula Makri in a bank queue.

She said Tsipras took too long to shut down the banks. “I’m in total agreement with (banks) closing. The queues are nothing next to all the suicides, the soup kitchens and the homeless on the streets of Athens.”

Greek Finance Minister Yanis Varoufakis told Bloomberg TV he would resign in case of a “yes” vote.

French Finance Minister Michel Sapin said Europe remains committed to avoiding “catastrophe” for Greece and keeping it in the eurozone.

“The exit of Greece from the eurozone is not desirable, nor envisaged,” Sapin said on France’s iTele television Thursday.

If voters reject international bailout terms in Sunday’s vote, then “we are entering in an unknown zone, an economic slide,” Sapin warned.

Sapin had been pushing for an agreement with Greece before Sunday, but after a fruitless meeting of European finance ministers Wednesday, he conceded there was no point negotiating until after the vote.

He said he and other European finance ministers “tried until the last minute to find an accord, until the Greek prime minister said no.”

European officials say Greece walked out of negotiations last week when the two sides were relatively close to a deal. Varoufakis said the main disagreement between the two sides was the notion of easing the terms on Greece’s debt.

He told Bloomberg TV “I prefer to cut my arm off” than sign a rescue deal that does not include a debt relief provision.

Business associations and the country’s largest labor union urged the government to cancel the referendum, while two private citizens have appealed to the Council of State, the country’s highest court, to rule the vote unconstitutional.

The Council of Europe — an independent body with 47 member states that monitors elections and human rights — told The Associated Press the referendum would fall short of its internationally accepted recommendations, with the time allowed too short and the question put the people not clear.

In a sign of serious financial deterioration, Greece suffered another sovereign downgrade Wednesday night, the fourth this week. Moody’s slashed the country’s rating from Caa2 to Caa3, or just above default.


Paris Ayomamitis in Athens contributed.

TIME Greece

How Germany Called Greece’s Bluff Ahead of Bailout Vote

The leftist government in Greece may have overestimated the resolve of its supporters

At first the call for a referendum was bold enough to seem clever, or at least typical of the chutzpah that helped bring Prime Minister Alexis Tsipras to power in Greece in the first place. Its logic was simple. With talks between Greece and its creditors at an impasse, why not give the people a chance to demand a better deal at the ballot box? Would Germany and the other European powers be so callous as to ignore the outcome of a democratic vote? At the very least, the referendum would renew the government’s mandate in its struggle for debt relief.

Germany, however, didn’t flinch. Chancellor Angela Merkel called the bluff on Tspiras’ last-minute gambit with an almost taunting composure. “Before a referendum, as planned, is carried out, we won’t negotiate on anything new at all,” she said on Tuesday. In other words, her response to the threat of a referendum was simple: Knock yourself out.

The Chancellor was not just being stubborn. She had seen the Greek opinion polls suggesting the July 5 referendum would not come out as Tsipras hopes. Although the polls since then have been more mixed, an early majority seemed to emerge this week in favor of a bailout deal, one that would save Greece from abandoning the euro even at the price of higher taxes and more austerity.

On Tuesday evening, tens of thousands of Greeks gathered outside the parliamentary building in Athens to support this position, defying their Prime Minister with calls for Greeks to vote in favor of the deal. Their numbers, to the surprise of many in the crowd, clearly dwarfed the demonstration that had gathered the night before to back Tsipras in rebuffing Greece’s creditors.

The Prime Minister then appeared to lose his nerve. On Tuesday night, he sent a letter to European Finance Ministers asking for another bailout — and apparently conceding to most of their demands for more cuts to the welfare system and higher taxes. The concessions were shocking, as they bowed to many of the terms that Tsipras had so vehemently opposed for months. Nevertheless, it took just a few hours for the European ministers to reject his appeal, surely not without the influence of Germany.

“This government has done nothing since it came into office,” German Finance Minister Wolfgang Schäuble said in a speech the next day. “It has only reversed measures. It reneged on previously agreed commitments. It negotiated and negotiated.”

By that point, Greek workers and pensioners had been given a taste of what it could mean to defy their nation’s creditors. The European Central Bank had cut off its emergency cash injections to Greek banks as of Sunday, forcing them to limit the amount of money their clients could withdraw from ATMs. This measure soon caused crowds of elderly Greeks to gather outside banks in Athens to collect at least a portion of their pensions, their outstretched hands providing a grim image of what Greece could turn into without the support of its European peers.

It was not what Tsipras had in mind when he gambled on the referendum. On Friday afternoon, hours before the Prime Minister announced the vote, a senior official in his government had explained the logic of this option to TIME. “This government is determined to keep struggling to persuade the European community that Greece wants to stay in,” said Rania Antonopoulos, the Deputy Minister in charge of combating Greece’s sky-high unemployment. “But we cannot accept conditions that would bring about even more recession.”

Her reasoning was sound. When Greece first accepted austerity in exchange for a bailout in 2010, its creditors badly underestimated the damage it would do to the Greek economy. The country’s GDP wound up shrinking by a quarter over the next five years, creating a recession that has been deeper and more protracted than the U.S. Great Depression. Unemployment also rose to a peak of around 28% in February, with half of young people now jobless in Greece.

Tsipras came to power in January with a promise to change course, and he immediately took his core election promises to Greece’s creditors. The 40-year-old leftist demanded a reduction of his country’s debt, relief to the poor and, above all, no more austerity imposed on Greece from without.

“They are not carelessly engaging in this dialogue,” Antonopoulos says of Tsipras and her other Syriza party leaders. “They are exhausting all possible options before they say, ‘Well, they are kicking us out [of the euro zone]. And if they are kicking us out and we have no other way, then of course we will take it to the people, and the people will decide what is our next move.’”

But Syriza may have overestimated the people’s resolve. Among the party’s core supporters were many of Greece’s poorest citizens, who are ill prepared to face the reality of cash shortages, bank runs and a future without the euro as their currency. In the past few days, the European Union has done its best to demonstrate how painful that reality would be.

“If they vote no, it would be disastrous for the future,” said Jean-Claude Juncker, the president of the European Commission, which along with the International Monetary Fund and the European Central Bank, makes up the so-called troika of Greece’s creditors. “No would mean they are saying no to Europe,” he told a press conference on Monday.

To many in Greece, this seemed like a blatant attempt to influence the outcome of the referendum, as did the European move to cut the flow of emergency liquidity to Greek banks. The European Central Bank could have kept that assistance alive for just a few more days, allowing banks to stay open at least until the referendum. Instead it chose to turn off the faucet the day after Tsipras called the vote.

Stefanos Manos, a Greek conservative who served as Minister of Finance in the early 1990s, says he’s glad Europe is sending such a clear message. He was among the first to point out how wasteful and inefficient the Greek state had become — and, he says, was considered an “extremist” for doing so. He now sees the referendum as a chance for Greeks to finally accept that he was right — and that perhaps, Merkel is too. “It seems we will come out on top,” Manos says.

The Prime Minister isn’t so sure. In a televised address on Wednesday, Tsipras continued to defy the troika by urging Greeks to vote against the bailout deal — not as a rejection of the European Union or its currency, he said, but as a means of giving him a stronger position in negotiations going forward.

That doesn’t seem like much of an upside when compared to the referendum’s risks. If the people side with Tsipras, he’ll just have to return to the same negotiating table, albeit with a slightly better hand and a revitalized mandate to take a tough position. If voters turn against him, he won’t have any hand to play at all.

Read next: Battle for Greek Votes Under Way as Cash Shortages Bite

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MONEY Greece

How Investors Should React to the Greek Crisis

Louisa Gouliamaki—AFP/Getty Images The Greek economic crisis isn't ending anytime soon.

Step one: Don't panic.

Even from afar, it’s hard for U.S. investors to ignore the Greek economic crisis, which continues to roil global markets.

After Greece saw its bailout funds expire Tuesday—and became the first developed country to fail to pay back a loan from the International Monetary Fund—Greek prime minister Alexis Tsipras sent a letter offering concessions to European creditors in hopes that a new agreement might help the country remain afloat.

The fate of the Greek economy depends in large part on whether its government can quickly make a deal with European leaders.

One point of tension: Leaders in Germany, Greece’s biggest creditor, are insisting that the country accept additional austerity measures like pension cuts before it can get more emergency funds. Though a compromise could be reached this week, the worst case scenario is that Greece would continue to miss debt payments and, eventually, be forced out of the euro currency. Doing so would allow Greece to pursue its own fiscal and monetary policies in pursuit of economic recovery.

But what would that mean for investors around the world? The short answer, assuming you have a fairly diversified portfolio of stocks and bonds, is that it probably wouldn’t have a dramatic long-term effect.

Here’s why: If you look at the kind of target-date mutual funds that are popular compenents of many American retirement accounts, like 401(k)s—the Vanguard Target Retirement 2035, for example—about a third of their holdings are in foreign stocks. And of those foreign stocks, only a small fraction tend to be Greek companies. The Vanguard Total International Stock (which the 2035 fund holds), for example, has only about 0.07% of assets in Greek companies. So not a lot of direct impact.

The indirect impact is also likely to be muted. More than 45% of the holdings in Vanguard Total International Stock are in European countries—and if Greece leaves the Eurozone, that could affect companies and markets throughout the Continent. But some analysts are arguing that the market has already reacted, and perhaps even over-reacted, to the possibility of a so-called Grexit. “You have to assume that a substantial amount of the correction is priced in,” Lawrence McDonald, head of U.S. macro strategy at Societe Generale, recently told MarketWatch.

That being said, a note of caution ought to be sounded about the dollar. If the Greek crisis isn’t resolved quickly, it could lead to a flight to safety away from the euro and toward the U.S. dollar. The dollar’s strength has already led to sluggish profit growth in the U.S. In the past few months, the euro has rebounded a bit. But the euro could weaken again if crisis persists in Greece, putting U.S. companies that sell their goods abroad in a tough spot.

Still, even if you believe things in Greece will get worse before they get better, history suggests you’d be unwise to pull much of your money from the market right now. Though we could be in for more bad news and some painful market gyrations in the near term, keeping your money invested and sticking to your long-term strategy will likely pay off in the end—no matter what happens in Greece. Plus, there’s potentially good news for bond investors: If fear of European instability drives investors to seek out safe assets like U.S. Treasuries, then many bond funds will do well.

TIME Greece

Here’s What Greek Austerity Would Look Like in America

Putting Greece's economic catastrophe into perspective

Greece is in the middle of a fresh round of economic tumult as its leaders try to negotiate terms for a new bailout package to keep the country financially afloat. Since 2010, Greece has been receiving money from the European Union and the International Monetary Fund in exchange for agreeing to harsh spending cuts and tax increases. The steep cost-cutting measures, known as austerity, have become a common practice across Europe as the continent has struggled to regain its economic footing following the global financial crisis of 2008.

But Greece’s case has been especially extreme. With steep slashes to health funding, salaries and pensions along with huge tax increases, Greek unemployment has skyrocketed, as have the number of people in poverty. As of Tuesday night, Greece had defaulted on a $1.7 billion payment to the International Monetary Fund, and the financial future of the country is looking increasingly dire. Greece will have to agree to even more spending cuts to continue to receive funding.

To place the severity of Greece’s austerity measures over the last several years in perspective, here’s an idea for how the same types of cuts would impact the United States.

  • Greece’s minimum monthly wage was cut by 22% in 2012, from 751 euros to 586 euros. A similar cut in the U.S. would drop the hourly minimum wage from $7.25 to $5.66.
  • In 2009 and 2010 Greece implemented a variety of cuts to salaries for public sector workers that worked out to an average pay cut of about 15%. In the U.S. that would decrease the average government employee’s pay from $51,340 per year to $43,639, using 2012 figures.
  • Pension cuts have been an especially controversial pain point in Greece, and the combined cuts have lead to a 40% decrease in pension funding since 2009, according to the Associated Press. A similar drop in Social Security payouts in the U.S. would mean the average senior citizen’s monthly would mean a drop in Social Security payouts from $1,294 per month on average to $776 per month.
  • Greece’s national health budget has been slashed by about 40% since 2008, according to the New York Times. Using U.S. health spending figures from 2013, that would drop federal, state and local government spending on health care from $1.25 trillion ($3,980 per person) to $725 billion ($2,388 per person).
  • In 2010 Greece increased the tax on cigarettes by about 20 percent. That would increase the tax on a pack of cigarettes in New York from $6.86 to $7.89.
TIME Greece

Markets Rise as Greece Makes Concessions, But No Deal Seen Before Sunday Vote

Greece is in a financial limbo now that its bailout program has expired

(ATHENS, Greece)—Greece’s government has made new concessions in talks with its creditors, though some European officials said they were still not good enough and that a deal was nevertheless impossible before a Greek referendum on Sunday.

Prime Minister Alexis Tsipras sent a letter Tuesday night, just hours before the country’s bailout program was due to expire, saying his government was prepared to accept creditors’ proposals made last weekend, subject to certain amendments.

The creditors did not accept Greece’s new overture, leaving the country’s bailout program to expire. But eurozone finance ministers will meet again on Wednesday to discuss the terms again. Hopes that Tsipras was softening his position — after refusing for five months the spending cuts that creditors had demanded in exchange for loans — boosted markets on Wednesday.

But German Finance Minister Wolfgang Schaeuble was clear that no deal was imminent, at least not before Greece holds a popular vote on the creditors’ proposals on Sunday.

“Before a referendum, there is indeed no basis (for an agreement),” Schaeuble said.

In Athens, crowds of anxious elderly Greeks thronged banks for hours from before dawn Wednesday, struggling to be allowed to withdraw their maximum of 120 euros ($134) for the week after the government reopened some banks to help pensioners who don’t have bank cards.

Greece is in a financial limbo now that its bailout program has expired, cutting it off from vital financing and pushing it one step closer to leaving the euro. The country has put limits on cash withdrawals in order to keep banks from collapsing.

Its situation was further worsened Tuesday when it failed to repay a debt to the International Monetary Fund, the first developed country to do so. The last country to miss an IMF payment was Zimbabwe in 2001. As long as it is in arrears on the payment to the IMF, one of the country’s main creditors, Greece cannot get any more money from the organization.

Greece’s crisis took a turn for the worse after Prime Minister Alexis Tsipras announced last weekend that he would put a deal proposal by Greece’s international creditors to a referendum on Sunday, July 5, and urged a “No” vote.

The move increased fears the country could soon fall out of the euro and saw Greeks rushing to pull money out of ATMs, leading the government to shutter its banks and restrict banking transactions. Greeks are now limited to ATM withdrawals of 60 euros ($67) a day and cannot send money abroad or make international payments without special permission.

European officials and Greek opposition parties have been adamant that a “No” vote on Sunday will mean Greece will leave the euro and possibly even the EU. The government rejects the argument as scaremongering, and says dismissing creditor demands will mean the country is in a better negotiating position.

However, government officials have begun hinting that the referendum might not go ahead if agreement with creditors is reached this week.

“Look, if a deal is found, there is a chance there could be this possibility too. Everything is developing,” Health Minister Panagiotis Kouroumplis said when asked during a morning news show on Antenna television whether the referendum could be called off under certain circumstances.

On Tuesday night, Deputy Prime Minister Yannis Dragasakis hinted the same. The government decided on the referendum, he said on state television, “and it can make a decision on something else.”

It was unclear, however, how that would be possible as Parliament has already voted for the referendum to go ahead.

With many elderly Greeks unable to access any money without bank cards, the government said about 1,000 bank branches across the country would open for three days starting Wednesday to give them access to some cash.

But a seeming last minute decision to serve customers on an alphabetical basis, announced by some banks overnight and by others in the morning, led to chaotic scenes of confusion and anger, with many pensioners waiting for hours from before dawn to be eventually told they would have to return Thursday or Friday.

Others were told their pensions had not yet been deposited and they would therefore have to return later in the week.

“It’s very bad,” said retired pharmacy worker Popi Stavrakaki, 68. “I’m afraid it will be worse soon. I have no idea why this is happening.”

Meanwhile, many ATMs had run out of 20 euro notes, meaning the maximum they would dispense per day was one 50 euro note per bank card, effectively cutting the amount of cash Greeks have access to.

Capital controls will remain in place until at least next Monday.

“I don’t have a lot of money, but I have to buy medicine. It’s important,” said 62-year-old Nikolaos Agonatos.

Greece’s latest offer involves a proposal to tap Europe’s bailout fund — the so-called European Stability Mechanism, a pot of money set up after Greece’s rescue programs to help countries in need. It does not include the IMF.

Tsipras’ office said the proposal was “for the full coverage of (Greece’s) financing needs with the simultaneous restructuring of the debt.”

Speaking on a late-night television interview Tuesday, Dragasakis said the new proposal “narrows the differences further” between Athens and its creditors.

“We are making an additional effort,” he said. “There are six points where this effort can be made. I don’t want to get into specifics. But it includes pensions and labor issues.”

On international markets, shares in Japan and Hong Kong rose slightly Wednesday as investors watched to see the next step in the Greek saga.

“International markets appear to have found a level where they are happy to sit and wait on the next developments in the Greek debt crisis. Greece’s failure to meet the deadline on its IMF payment looks to have been fully anticipated by markets. Barring unknowns, the next critical event for markets will be the outcome of Sunday’s referendum,” Ric Spooner, chief market analyst at CMC Markets, said in a commentary.

TIME Greece

Greeks Fear a ‘Haircut’ on Their Savings As Bailout Deal Expires

A Greek national flag flutters atop a building as dark clouds fill the sky in Athens on June 30, 2015.
Alkis Konstantinidis—Reuters A Greek national flag flutters atop a building as dark clouds fill the sky in Athens on June 30, 2015.

A Cyprus-style tax on deposits is one of the dwindling options the Greek government has left

The phones at Tax Solutions, an accounting firm in the south of Athens, began ringing non-stop early on Monday. On orders from the Greek government, the banks did not open that morning as harsh restrictions were imposed on the amount of money their clients could withdraw.

The accounting firm’s CEO, Vassilis Bagourdis, had been up since dawn, nervously puffing at cigarillos and trying to figure out what the capital controls could mean: Had Greek banks at last run out of money? How long would they stay solvent? And could the government now levy a tax on deposits like the one Cyprus imposed two years ago?

This scenario, which amounts to the seizure of money from private accounts, would be the latest in a fast succession of financial nightmares for Greece, but at this point, Bagourdis says, “There is no telling what tomorrow will bring.” As of midnight on Tuesday, the bailout program that has kept the Greek economy afloat officially expired, and Greece missed a $1.6 billion payment to the International Monetary Fund, meaning it has essentially defaulted on its debts. As a condition of any more assistance, Greece’s creditors have demanded more reforms and austerity measures, including tax hikes and pension cuts, which Greek Prime Minister Alexis Tsipras has repeatedly rejected.

His government is clearly getting desperate. As the midnight deadline approached, Tsipras appealed for another bailout from the 18 other European countries that use the euro as their currency. It would be the third bailout Greece has received in five years. The first two were worth a combined 240 billion euros, and the third one that Tsipras requested would need to extend at least another 30 billion euros over the next two years just so Greece can make payments on existing debts. After an emergency conference call on Tuesday, however, European finance ministers denied his request.

That pushed Greek banks closer to the brink. Over the weekend they had already been cut off from emergency cash injections from European Central Bank, prompting the government to limit withdrawals from each account to a mere 60 euros per day, barely enough for a family to go grocery shopping in Athens. On top of those restrictions, the banks will also remain closed for a “holiday” at least through July 5, which is the next day of reckoning on the Greek financial calendar.

That morning polls are scheduled to open for a national referendum on whether or not to accept the conditions of more assistance from the country’s creditors. It is a bizarre choice to put on a ballot, not least because the creditors formally withdrew their offer as of midnight on Tuesday, when Greece’s bailout program expired. So if the referendum goes ahead – and that is still a big “if” – the Greeks will be asked to vote on a deal that is no longer on the table. Still, the outcome of the vote would mark another step toward the dreaded deposit tax, sometimes called a “haircut” on deposits.

Innocuous as the euphemism seems, this measure would amount to the government seizing the money it needs from regular people’s accounts. “Depending on how the referendum goes, I’d say there is a 60-70% chance of a haircut,” says Bagourdis, whose clients include businesses that would be devastated by such a move.

Some opposition lawmakers put the odds even higher. If voters reject the terms of continued aid from Greece’s creditors on July 5, “the chances of a haircut would be certain,” says Haris Theoharis, a parliamentarian who until late last year was Greece’s top tax collector.

It would in some ways be a repeat of the 2013 crisis in Cyprus. In March of that year, the European Central Bank also stopped providing cash injections – known as emergency liquidity assistance (ELA) – to struggling Cypriot banks, much as it did to Greek banks over the weekend. The government in Cyprus complained that this was a form of blackmail from its European creditors, but in the end it was still forced limit cash withdrawals and impose a tax on deposits, shaving 10% off the value of uninsured accounts that were worth more than 100,000 euros.

In part because many of those accounts belonged to wealthy foreigners – primarily Russians who were using Cyprus as a tax haven – the country did not see any mass unrest after its haircut on deposits. “But here it would be different,” says Bagourdis, who also serves as a senior adviser to the opposition New Democracy party in Greece. “Here it would be regular families and businesses that suffer from this measure.”

Though the current government denied that it was considering such a move earlier this year, the possibility of such a stopgap measure has made many Greeks nervous. In May, the Guardian newspaper quoted an official from the Greek central bank warning that this could cause a violent public backlash. “We would see the revolt that this crisis has not yet produced,” the official was quoted as saying. “There would be blood in the streets. The Greeks are not like the Cypriots.”

It would then be very hard for Tsipras to maintain his base of support – and to stay in power – especially considering that he was elected in January on a promise to end austerity and reduce the tax burden on workaday Greeks. But the dramatic collapse of his negotiations with Greece’s creditors since then has left Tsipras with fewer and fewer options. As part of a new bailout deal, European financial institutions could even insist on a haircut on deposits, much as they did during the Cypriot crisis of 2013.

So even if Greeks vote on July 5 to accept the harsh terms of their country’s creditors – as European leaders have urged them to do – they would still not take the prospect of a deposit tax off the table. “We would still be moving in that direction,” says Bagourdis. As its options for emergency financing are whittled down, the Greek government could be left with no other choice.

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