After no, Greece needs a yes

After Sunday's vote Greece has two options. One, it may renegotiate a fresh bailout, which is not easy. Two, it may opt out of the eurozone, and possibly from the European Union if bailout talks fail. This would be a difficult road to take. The Greek banks are fast running out of cash. Unemployment is high (25 per cent) and so is inflation. The economy is sinking. Despite a difficult domestic situation the Greeks rejected Europe’s austerity terms, partly to protect their pride. They view Germany and France as the new colonial powers dictating terms to them. 

To stay afloat, however, Greece needs a bigger bailout. European leaders seem ready for talks but have hinted at tougher conditions for any fresh help. With the Greeks backing his call for a no vote Prime Minister Alexis Tsipras walks tall. But at this stage tact and diplomacy are more important than rhetoric and bravado. To facilitate and ease loan negotiations, his Finance Minister has stepped aside. This alone may not melt the European and IMF lenders and secure for Greece the badly needed cash. As Germany's Angela Merkel has suggested, Prime Minister Tsipras has to make an offer the skeptic creditors may find hard to resist. 

Europe is a small economy and its exit may not cause ripples beyond the continent. The US recovery may be affected but the impact on India, as the stock markets made it clear on Monday, may be negligible. India has sufficient foreign reserves to fix rupee volatility, if any, following capital outflows. In some ways India stands to benefit. The turmoil in Europe has caused oil prices to fall. As the dollar is gaining strength, the US Federal Reserve (central bank) may delay rate cuts, which is a positive signal for India. Since China's markets have lately become highly volatile, foreign investment flows may turn towards India where, thanks to a better-than-expected monsoon, falling oil prices and subdued inflation, growth prospects have brightened.