When it comes to growth slaying austerity measures, the Greek offered an unequivocal response: No means no.

The Sunday referendum in Greece overwhelmingly rejected the austerity measures proposed by the European creditors to whom the Greek owe loads of debt. The youthful political Greek leadership, Prime Minister Alexis Tsipras is just 40-years old, demonstrated the courage and tenacity needed to stand up to the troika: the IMF, the European Central Bank (ECB), and the European Commission (EC).

Also read: Greece on the brink

As Greece negotiates with the troika about its financial obligations, other heavily indebted countries maintain a close watch on how this dispute is settled. The IMF believes the Greek debt is insolvable. This puts debt relief on the table, which has piqued the attention of others who also owe billions in external debt. However, such countries, including Pakistan, must know that the Greek crisis is unique and regardless of how it is settled, it may not generate precedents for others.

—Source: http://www.bbc.com/news/world-europe-33406001

The global response to the Greek debt crisis gives the impression that it may plunge all of Europe, some think even the entire world, into an economic crisis. This seems rather exaggerated. With roughly 11 million people supporting a $240 billion economy, Greece is a very small economic player, not large enough to cause a European, let alone a global, economic meltdown.

Yet, celebrated economists, finance ministers, and bank executives are all fixated on the Greek debt crisis (aka Grisis) and wagering on Greece’s possible exit from Europe (aka Grexit).

Greece is fortunate to have celebrity economists speak in favour of debt relief and reforms. From Nobel laureates, such as Joseph Stiglitz and Paul Krugman, to celebrated authors, Jeffrey Sachs and Thomas Piketty, all have spoken against the troika-dictated structural adjustment programs (SAP) that have contributed to chocking the Greek economy and creating high unemployment, which currently stands at 25 per cent. The situation is even worse for the Greek youth of whom one in two is unemployed.

Also read: Europe’s dream is dying in Greece

Paul Krugman, Jeffrey Sachs, and Joseph Stiglitz have urged the Greek voters to vote ‘No’ in the referendum and reject the terms set by the creditors asking for even more austerity measures. These economists are of the view that austerity failed to deliver the expected economic growth. In fact, they believe that austerity is the very reason why the Greek economy failed to grow. Professor Stiglitz, for instance, warned, “A yes vote would mean depression almost without end.”

The 'Yes' side is not without supporters. The European finance ministers, creditors (IMF, EC, and ECB), and the Greek and other European media have been busy painting a doomsday scenario for the Greeks. They insinuated that if Greece were to decline the creditors’ terms, it would mean an automatic expulsion from the EU. The pollsters, before the referendum, spoke of a very narrow margin separating the yes and no sides, suggesting a confused electorate.

The reality was starkly different; the Greeks were not confused. Instead, they were poised to take control of their destiny. In the end, the Greeks followed their young leaders and over 61 per cent returned a convincing no to the creditors’ terms.

Also read: Greece faces last chance to stay in euro as cash runs out

Since 2009, the Greeks have been subjected to a series of austerity measures that have contributed to choking the economic engine. In February 2010, the Greek Parliament passed the first austerity package that froze salaries of government employees, cut bonuses and overtime workers. In less than a month, the Parliament passed the second austerity package freezing pensions, increasing sales and fuel taxes, and further wage cuts for public sector employees. The Parliament passed the third austerity package in May 2010. Later in July 2010, the government implemented pension reforms that increased the retirement age from 60 to 65 for women. Further cuts were passed in December 2010.

The Greek government continued with introducing wage cuts and imposing new taxes in June 2011. By the time the fifth austerity package was passed by the Parliament in October 2011, violent riots broke out outside the Parliament building. As a condition to receive the bailout package from the IMF and other creditors, the Greek government in November 2012 continued to cut wages of public sector employees and pensions. The retirement age was extended to 67 years.

It does not require one to have a PhD in economics to realise that wage cuts and reduction in benefits, such as pensions, reduce the buying power in the economy, resulting in slowing down of the economic engine. As the government passed more stringent austerity measures, the economy choked even further, thus prompting the former Greek finance minister, Yanis Varoufakis, to quip: “Austerity is like trying to extract milk from a sick cow by whipping it.”

As the Greek economy choked, the credit rating agencies did their part to make matters worse by continuing to downgrade Greece’s credit rating. Being caught sleeping at the wheel during the Great Recession in 2008, when the credit rating agencies awarded the highest rating to toxic debt made up of subprime mortgages, the rating agencies were quick to pounce on the same Greek economy that they had earlier ranked favourably to have received huge amounts of debt from the lenders.

Also read: 'Europe without Greece? Joke,' says Greek foreign minister

But what about the economic Armageddon that may follow if the Greeks are forced to abandon the Euro?

Wolfgang Munchau in the Financial Times challenges the scare tactics and points out that the Greeks have already experienced the worst financial effects of the austerity measures and the debate about the choice of currency is rather farcical. He wrote:

What I found most galling was the argument that Grexit would bring about an economic catastrophe, as though the catastrophe had not already happened. If you have been unemployed for five years, with no prospect of a job, it makes no difference whether the money you do not get is denominated in Euros, or in Drachma.

Paul Krugman and others believe that had Greece been able to manipulate its own currency, it would have devalued it to generate economic growth and increase exports. This is not possible today because Greece is part of the EU. If it were to leave Euro, it would then have the opportunity to engineer its economy.

Should the Greek be wary of the economic disasters associated with an exit from Euro? Not really, says Paul Krugman. “[A]t this point that financial crisis has already happened, so that the biggest costs of euro exit have been paid. Why, then, not go for the benefits?”