India and China, in war of words, are at a standoff

In the Himalayan highlands, a small stretch of rocky plateau is at the centre of a military standoff, with two Asian behemoths breathing fire at one another as Bhutan, an involved bystander, sinks into the shadows.

The location – Doklam – is barely 89 square kilometres of land in dispute between Bhutan and China, with India playing protective mother hen to Bhutan. The current escalation is new, but the heart of the matter is not: Two countries are jockeying for neighbourhood control, fed by strategic concerns and the memory of the 1962 war, one in which China dealt India a crushing military blow. Bhutan is merely the stage where the second act of live theatre is unfolding.

The contested area is strategically located, nestled between Tibet’s Chumbi Valley on the west and Sikkim, India, in the south. Through the pass into India one enters the Siliguri Corridor, otherwise known as Chicken’s Neck, a narrow stretch of land which provides the only land access between India’s Bengal state and its eight northeastern states where 45 million Indians live. Chicken’s Neck gives India reason to worry.

China, of course, is a planning pro. Road building – and major engineering projects – are a key part of its strategic goal to reach far-flung border areas. Several decades ago it achieved a herculean task by building a railroad through Xinjiang province. The rails spliced through the Taklamakan Desert, a silk route which had the reputation: “Go in and you will never come out.” China did, connecting the mainland to Urumqi and flooding the city with oilmen hungry to extract the province’s abundant natural resources. Much, of course, to the chagrin of Xinjiang’s autonomy-seeking populace.

The Doklam conflict was initiated by a similar – if less ambitious – road project, which could give China near-access to the pass that enters India’s Sikkim region, east of which China also has land claims. India was able to respond quickly because of its long-established foothold in Bhutan. With troops in place and a military academy located in nearby Haa Valley, its foot soldiers rose to the occasion.

The backdrop to this current conflict is both political and emotional. India, while concerned over China’s strategic moves, is also hankering for revenge. In the one-month 1962 war, almost 1,400 Indian soldiers were killed over China’s 700. Prior to facing off then, the two had been on good terms: a common slogan of the time was “Hindi-Chini bhai-bhai” (India China Brothers Forever).

Yet those were early days for a young India, which had secured independence from the British in 1947, inheriting unclear boundaries and dated agreements like the 1890 agreement China is forcing upon Bhutan today.

In China, the Communist Party came to power in 1949, leading its forces into Tibet in 1959. When the Dalai Lama sought refuge in India, Mao Zedong could not have been pleased. He was also concerned (wrongly) about India’s interest in Tibet. While asserting its military superiority in 1962, however, it lost the “Indo-China Brothers Forever” momentum. From this point on, its camaraderie with Pakistan also irked India.

The perception of betrayal partially fuels reactions in India today, with official statements reminding China that India is no longer a country with little means. Its decision to push troops into position did not appear to involve Bhutan.

This puts Bhutan in an uncomfortable place, with a limited role in current negotiations. Prior to this conflict, Bhutan had 24 border discussions with China. Now the discussions are between India and China, not Bhutan and China.

On its southern border, Bhutan has a 1949 “friendship” treaty with India, in which it ceded significant control over its defence and foreign affairs. India trains its military, builds roads and projects like the hydroelectric plant.

Many Bhutanese speak Hindi with ease, partly as a result of their love for Indian TV shows. But such ties come at a cost. Bhutan’s economy is tourism dependent; it levies hefty foreigner tourism fees on luxury travellers but Indian visitors enjoy visa-free entry. As times change, though, some Bhutanese want to be less clearly aligned – they seek a more balanced relationship with India and China.

But two months into the standoff, with Indian and Chinese soldiers pelting each other with stones at the border and Chinese officials declaring that bonhomie is out of the question unless Indian soldiers withdraw, a change in the status quo appears unlikely. The mountain kingdom preaching happiness remains stuck between a rock and a hard place.

VISION OF FUTURE

- Hari Prasad Regmi

By 2050, if Nepal is still poor, it will struggle to survive between two of the most prosperous and powerful nations on earth. By 2050, Nepal's northern neighbor China is projected to be the most prosperous nation in the world and India to the south is expected to become the third most prosperous. Hence, Nepal in between faces an existential crisis and at the same time an immense opportunity. Throughout its history, Nepal has pragmatically dealt with both India and China to preserve its sovereignty. All successful nations tie their foreign policy with their own prosperity, by focusing on interdependence, multi-alliances and by responding, as opposed to reacting. On the contrary, since the last 20th century Nepal's foreign policy has been a contradiction, swinging wildly between dependency and reactionary.

Nepal's various rulers in this past century invited multiple direct or indirect foreign interferences, which worked against Nepal's prosperity. The 'economic blockade' in 2015 has served as a stark reminder of the painful consequences of decades of neglect of foreign relations and internal security. Today, Nepal remains a painfully dependent, unstable and desperately poor nation in a super-powerful neighborhood. We acknowledge the painful situation where our two giant neighbors pose a clear and present threat to our sovereignty if Nepal does not transform into a prosperous nation, along with them, in the near future. Therefore Nepal's foreign and its adjoining socio-economic policies have to be persistently guided by the reality that to survive, Nepal must become a prosperous nation by 2050.

To achieve this, Nepal should engage in a continuously evolving "interdependent" prosperity building, delicately balanced relationship with its two big neighbors and the world beyond. We propose a holistic policy called the North-South doctrine for Nepal. This doctrine envisions: i) building a perception of Nepal as at "the center of the world," ii) interdependent economic relationship between Nepal, India and China, iii) building the country as a bridge between its two neighbors, iv) protecting neighborhood to strengthen internal security and v) holistic cross-border cultural understanding. Nepal should start building a perception that it is at the center of the world because of its geo-strategic location between China and India. Why? By 2050 the global center of gravity will shift to this region, and Nepal happens to be right in the middle of all this. Through subtle diplomacy we will influence Chinese and Indians to think of our region as the center of the world. To build this perception internationally, Nepal will use "Center of the World" tag on its diplomatic channels and encourage travelers and migrants, expatriate Nepali community and students studying overseas to repeatedly brand this analogy. Inside Nepal, we persistently inject this terminology into our citizen's psyche through our leadership, education system, literature and media so that we truly believe and take advantage of our location as the "center of the world". North-South doctrine advocates Nepal as a bridge between India and China. It ensures smooth safe zone, a cushion, a transition from one super-power to another super-power that compete fiercely yet need to collaborate closely to stay as superpowers. Nepal will become a transit, a hub for both Indian and Chinese businesses. To ensure this, Nepal will set up frameworks to ensure it acts as a smooth transition for its two neighbors to do 'fair trade' with each other. Nepal will focus on highly sought after agricultural and economic needs of India and China such as herbs, crops, minerals and other strategic resources that grow or are found specifically only in geography like Nepal's. Then India and China will depend on Nepal, too.

To build an interdependent economy, mega-infrastructure financial institutions like North-South Bank will be set up with equal stake of Nepal, India and China. This bank will invest on billion + dollar projects focusing on "water" and clean energy along with "mega-transit-transport infrastructure' projects that builds China and India's prosperity through Nepal. Initially perhaps it will also focus on fast-track highways/electric rail lines (linking Nepal's China border with its Indian border in at least five strategic places such as Far-western, Mid-western, Western, Central, Eastern development regions). North South doctrine dictates that Nepal becomes an effective buffer state between China and India. Nepal has to focus on becoming a facilitator, dialogue builder between India and China to improve relations that brings these two countries closer. On matters of any international dispute between India and China, Nepal uses its foreign relations center, the 'North-South Center' to continuously foster dialogue between two great neighbors. According to this doctrine, Nepal has to be aligned with both India and China, always on a watch for anything that hampers equitable prosperity in India and China as well.

Nepal will establish disaster security zones in the Western, Central and Eastern regions where at least a year long supply of strategic security materials like food, oil, equipment, transport and medicine are stored in seismic-resistant facilities to immediately respond to disasters in Southern Tibet, Nepal, North-East and North-West states of India. Nepal will be generous and empathetic in its use of strategic resources like water for the security of its neighbors too. Nepal will maintain an open but monitored border (monitor movement of vehicles and people through smart identification systems/ technology) ensuring hassle-free trade and movement for both India and China. Nepal will share vital neighborhood security information with its neighbors to help convince India and China. It will practice the policy of "peacekeeping through peacekeepers". It ensures its security forces transition to UN peacekeeping forces committing majority of its total force for international peacekeeping duties by 2030.

The North-South doctrine will promote Nepal as a 'zone of spirituality' by adopting a policy of "empathy through unity" to influence its immediate neighbors. Nepal can enhance spiritual tourism as a strategy to make Indians and Chinese empathize with the Nepali way of life by perfecting our "guests as gods" attitude. Nepal will build itself as a spiritual resource center for over a billion Hindus and nearly a half a billion Buddhists. To enhance deeper bonding between its intellectuals, a North-South University in Nepal along with Satellite centers in China and India will focus teaching interdisciplinary studies, building creativity around the working together of three distinct cultures and its myriads sub-cultures and languages. Meaningful implementation of any national policy is dependent on ethical delivery by its leaders. The North-South doctrine will evolve according to the challenges of the future but will remain focused on building a prosperous Nepal and a prosperous neighborhood. We envision all foreign relations and socio-economic policies of Nepal and its political parties in the next few decades to go through a "one door" policy which all political forces, bureaucracy and planners shall follow. The "North-South" doctrine is a start  the writer recommends for Nepal.

Self-Reliant Economy : Myth Vs Reality

As Nepalis reel under the unofficial blockade imposed by India, calls for a self-reliant economy have come from different quarters. These calls have come at a time when the country faces an acute crisis of essential goods like fuel and medicine, among others, because of the Indian blockade. Some see this as a knee-jerk reaction while others think this is the start of a long overdue process of freeing the country from its over-dependence on its southern neighbour for trade as well as survival.

  According to economists as well as business leaders, the blockade has made clear the harsh reality of Nepal’s situation – its dependency on one country for almost everything. Those supporting the idea of a self-sufficient economy say this dependence is dangerous as it can be used against our national interests. Therefore, they argue, Nepalis must learn the lesson they could not from the 1989 blockade by India and reduce import and strive for self-sufficiency.        

Economists define self-sufficiency or self-reliance as the state of not requiring any aid, support, interaction or trade with the outside world. It is generally believed that a fully self-dependent economy or autarky is not possible in today’s world.

So, is it possible or even advisable for Nepal, sandwiched between two of Asia’s largest economies, to go for self-sufficiency? Is the self-reliant economy just a theory and a myth or can it be turned into a reality?

“Self-reliance is a myth if it means a country depends on itself for all economic activities and thereby shuts out the rest of the world,” says former finance minister and senior economist Prof. Madhukar SJB Rana. He further clarifies, “Not quite a myth, however, if it means a national economy that seeks to use its natural and human capital to the maximum to generate growth and employment and, vitally, develop an economic and financial structure that is not excessively dependent on the outside world for markets, supplies and investments.”

Agrees Pashupati Murarka, president of the Nepalese Chambers of Commerce and Industry (FNCCI). “An autarky is not possible today. But that doesn’t mean we shouldn’t try to reduce our dependency on imports and strengthen from within and create a national economy based on domestic production,” he says.

Self-dependence or Interdependence?

According to a study carried out by economist Dr Damaru Ballabha Paudel for Tokyo University, the Nepali economy was 80 percent self-reliant in 2010 and met 20 percent of the domestic demand through imports. The study, which was based on Nepal’s input-output tables of 2010 and 2011, showed that Nepal was 47 percent self-reliant in the domestic demand of industrial productions and 90 per cent self-reliant in agriculture. 

Similarly, the country’s self-reliance in the hotel and restaurant sector was 95 per cent and that in electricity, gas and water was 55 per cent. Likewise self reliance in forest products, mine-based products, construction materials, telecommunications, transport, trade, and financial intermediation was 80 percent, 57 percent, 80 per cent, 90 percent, 61 percent, 82 percent and 78 percent, respectively. 

“Self-reliance has decreased while dependence on the outside world has increased over the last five years,” says Dr Paudel. According to him, we should seek self-dependence through interdependence in today’s world. 

“Interdependence means if we are dependent on a country for some products, we make that country dependent on us for some other products,” Dr Paudel says. “This is the way of becoming self-reliant today. An isolated economy as envisioned by Robinson Crusoe is not possible today.”

Former FNCCI president Kush Kumar Joshi echoes the same view and sees the current blockade by India in the same light. “We have been consistently dependent on India. This imbalance will change if we make developments to make India dependent on us,” he says, “Had we been exporting, say, 5000MW of electricity to India, it wouldn’t have dared to impose the blockade. That’s the power of interdependence.”

Economists say that the idea of interdependence is based on the production, consumption and export of goods and services that can be produced at competitive price and import of goods and services that cannot be produced or provided at competitive price. “This is the formula based on which the world economy functions today. Interdependence means self-dependence,” explains Dr Yubaraj Khatiwada, the newly appointed vice-president of the National Planning Commission and former governor of Nepal Rastra Bank.  

However, achieving self-reliance through interdependence is not easy for Nepal, either. What can it possibly export to other countries, including India to make such countries really dependent on Nepal? In the current situation, it is difficult to think of even one single such product. We have a vast potential in hydropower, but the bitter reality is, instead of exporting electricity, we are importing nearly 240MW of electricity from India.  

“Making a self-reliant and independent economy is not easy. It cannot be developed immediately and to achieve everything at once is only a delusion, says Nepal Chamber of Commerce (NCC) President Rajesh Kaji Shrestha, “If effective steps are seriously taken, then within five to ten years we should see some positive results.”

Storage Capacity

According to some economists, in its journey towards self-reliance, Nepal should first increase its capacity to store stockpiles of essential goods which it imports. “The blockade has exposed our poor petroleum storage capacity,” says an economist and commentator, “We didn’t learn from the 1989 blockade.”

He recalls that during the 1989 blockade, there was a lot of talk about exploring for petroleum within the country and exploiting alternative sources of energy such as solar power and hydropower. “But we forgot everything once India lifted the blockade and the situation became normal,” he says, “This time too, you will see the debate of becoming a self-reliant economy will fade once normality returns.”  

Agriculture and Hydropower

According to economists, these are the two sectors where Nepal can actually become self-sufficient. Agricultural diversification is possible in Nepal because of the topographical and geographical diversity. “Nepal should focus on the production of quality cash crops, vegetables and fruits and not only consume them but also export them to the international market. This way, we can achieve self-reliance in agriculture,” explains Dr Paudel. 

He also points out that for this, the government needs to focus on the modernization and commercialization of agriculture and provide subsidy to farmers who purchase fertilizers, seeds and agricultural machines and equipment to make our products price-competitive with Indian products.

Hydropower is another commodity in which we can not only become self-reliant but also export. For this, Dr Paudel says, the government should encourage both domestic and foreign investment in the hydropower sector. “We can also invite the Non-Resident Nepalis (NRNs) to invest in hydropower. Some NRNs have already invested in the 27MW Dordi hydropower project,” he says and adds that we have the potential to export electricity to not only India but also other South Asian countries.

Historical Examples of Autarky

• Afghanistan under the Taliban, from 1996 to 2001.

• Albania became a near-autarky in 1976, when Communist Party leader Enver Hoxha instituted a policy of what he termed "self-reliance".[5] Outside trade increased after Hoxha's death in 1985, though it remained severely restricted until 1991.[6]

• Burma followed a policy of autarky known as the Burmese Way to Socialism under dictator Ne Win, who ruled the country from 1962 to 1988.

• Cambodia under the Khmer Rouge, 1975–1979.

• Classical Greece idealized economic self-sufficiency at the level of oikos and city-state. This ideal broke down over time, and was redundant by the Hellenistic period.

• Nazi Germany under Adolf Hitler attempted to end international trade and considered economic self-sufficiency to be ideal. However, tasked with establishing full autarky in Germany as part of the Four Year Plan, (beginning in 1936) Hermann Göring failed to close the German economy.

• Guyana under Forbes Burnham's PNC dictatorship, from 1970 to 1985

• India had a policy of near-autarky that began after its establishment as an independent state, around 1950; it increased until 1980 and ended in 1991 due to imminent bankruptcy.[7]

• Italy, under the rule of dictator Benito Mussolini, claimed to be an autarky,[8] especially after the 1935 invasion of Abyssinia and subsequent trade embargoes. However, it still conducted trade with Germany and elsewhere.

• Japan was partially an autarky during the era known as the "Edo period", prior to its opening to the west in the 1850s, as part of its policy of sakoku. There was a moderate amount of trade with Netherlands, China and Korea; trade with all other countries was confined to a single port on the island of Dejima.

• North Korea's official state ideology, Juche, is somewhat based on autarky, though North Korea is not a genuine autarky as it conducts principles of trade with a few nations, as well as benefits on Chinese capital and trade.

• Romania in the 1980s. Nicolae Ceaușescu proposed such goals as paying the entire foreign debt and increasing the number of items produced in the country and their quality. The aim of these policies was to reduce dependency on foreign imports, as the relationship of Ceaușescu with both Western and Communist leaders was worsening.[citation needed]

• South Africa was forced into partial autarky during the later Apartheid era, when the country faced ever increasing economic sanctions from the international community, including an increasing oil embargo that motivated the state to embark on a successful coal-to-oil project and also establish its own military industries, including the creation of its own atomic bomb.[9][10]

• Spain, under dictator Francisco Franco, was an autarky from 1939 until Franco allowed outside trade again in 1959, coinciding with the beginning of the Spanish miracle.

• The United States, while still emerging from the American Revolution and wary of the economic and military might of Great Britain, came close to complete autarky in 1808 when President Jefferson declared a self-imposed embargo on international shipping. The embargo lasted from December 1807 to March 1809.[11]

• In the Dominican Republic, the rural peasants, escaped slaves, and freed slaves that lived in the sparsely populated woodland interior of the island nation between the 1600s and early 1900s. The weak Dominican government had no control on these autonomous subsistence agriculture based communities.

०७१/७२ मा राजस्व वृद्धिदर १३ प्रतिशत

आर्थिक वर्ष ०७१/७२ मा राजस्व वृद्धिदर १३ प्रतिशत

गत वर्ष ४ खर्ब २२ अर्ब ९० करोड रुपैयाँ राजस्व उठाउने लक्ष्य भूकम्पका कारण प्रभावित भएको । ४ खर्ब ५ अर्ब ८४ करोड ६४ लाख रुपैयाँ राजस्व उठेको  

कुल राजस्वमा

मूल्यअभिवृद्धि करको योगदान  २७.६९ %  
भन्सार महसुलको योगदान         १८.४ %

 आयकरको योगदान                 २१.८ %

 अन्तःशुल्कको हिस्सा              १३.२ %

गैरकर राजस्वको अंश               १२.३ %

Nepal: Economy

Excerpted from the Asian Development Outlook 2015.

Robust agriculture and remittances boosted growth and the current account surplus. Growth is expected to slow this year with an unfavorable monsoon but revive in 2016 as the weather returns to normal. Concluding the protracted negotiations over the new constitution would strengthen the outlook. Nepal can leave behind dependence on agriculture and remittances for an economy with a higher growth trajectory if it invests more in eliminating major deficiencies in infrastructure.

Selected economic indicators (%) - Nepal                                                 2015           2016

GDP Growth                                                                                              4.6               5.1
Inflation                                                                                                    7.7               7.3
Current Account Balance (share of GDP)                                                  2.7               3.5

Economic performance

Growth in Nepal’s gross domestic product (GDP) accelerated to 5.2% in Fiscal Year 2014 (ended 15 July 2014) from 3.5% a year earlier. A favorable monsoon boosted agricultural output and a marked increase in remittance income, now amounting to 28.2% of GDP, bolstered spending on services, which accounts for over half of GDP. Growth in agriculture, at 4.7%, and in services, at 6.1%, was the highest in the last 6 years. Industry again advanced only marginally at 2.7%, as long hours of power outages and other supplyside constraints continued to stunt manufacturing and divert to imports consumer spending on finished goods.

Economic prospects

The economic outlook is less favorable than in FY2014 because agricultural output is crimped by a weak monsoon and the political situation is fluid. The Constituent Assembly, the second of which was elected in November 2013, failed again to write a new constitution, this time by the 22 January 2015 deadline agreed by all political parties. There is yet no unanimity among the political parties on how to proceed. Many of the outstanding issues that the earlier Constituent Assembly failed to resolve remain contentious, leaving uncertainty over the future course of politics regarding such basic matters as the number, names, and functions of proposed federal states, as well as on the overall structure of governance.

Considering the unfavorable monsoon and the lingering political uncertainty, GDP growth is projected to slow to 4.6% in FY2015, less than the government’s revised target of 5.0%.

Assuming a stable political situation, a normal monsoon, a timely budget and its effective execution, and strong remittance inflows, GDP growth is expected to rebound to 5.1% in FY2016.

Greece's Debt Crisis

How did Greece get to this point?

The question of how to save Greece, debated for more than five years, is the European Union’s recurring nightmare. If the country goes bankrupt or decides to leave the 19-nation eurozone, the Greek debt crisis could create instability in the region and reverberate around the globe.

A father and daughter at a demonstration in Athens at the end of June. Greek citizens will decide whether to accept the terms of a bailou

What's Latest ?

Greece’s finance minister, Yanis Varoufakis, said on Thursday that he would resign immediately if Greeks voted yes in a referendum to accept the terms of an international bailout deal for the country.

That came a day after the country’s prime minister, Alexis Tsipras, urged citizens to vote “no” in the referendum, which is scheduled for Sunday. A “no” vote would potentially improve his negotiating position with European officials. European finance ministers, for their part, said after Mr. Tsipras’s address that they will wait to see how Greeks vote before beginning negotiations again.

What will a referendum do?

The country is approaching one of the most important votes in its modern history on Sunday — one that could redefine its place in Europe — yet many people acknowledge they barely have a clue as to what, exactly, they are voting on.

Greeks have been asked to vote yes or no on whether they supported the terms offered by creditors last week — an offer that in effect expired with the existing bailout package on Tuesday night, and that appears to have been supplanted in any case by a counteroffer offer put forward by Mr. Tsipras.

Greece last held a referendum in December 1974, after the collapse of the ruling military junta. Then, the question asked what type of government Greeks would prefer, and the choices were pretty clear — king or republic. Voters picked republic.

Today, critics argue that Mr. Tsipras is distorting democracy by holding a rapid-fire vote in which people lack the time to understand what they are voting for.

What happens next?

That’s the billion-euro question. Sunday’s referendum will test whether Greek citizens want to stay in the eurozone. New elections could also be held if Greece’s financial situation worsens. Or Greece could test the willingness of Russia or China to help should talks with Europe falter.

Some people are now saying that the real deadline for Greece is late July, after all the warnings that a Tuesday deadline with the International Monetary Fund was the make-or-break day.

July is when Greece owes the European Central Bank a 3.5 billion euro payment. If there is no international bailout program in place by that time, and little chance of such a program being in the works, the central bank at that point would probably have to finally take Greek banks off life support.

Did Greece default on its debt?

When borrowers — whether they are countries, companies or individuals — do not pay their debts on time, they are in default. For practical purposes, then, Greece — which on Tuesday failed to make a scheduled debt repayment of about 1.5 billion euros, or $1.7 billion, to the I.M.F. — has defaulted.

The I.M.F., however, does not use term default. It instead places countries that miss their payments in what it calls arrears.

Semantics aside, missing the payment might lead to a situation in which other large Greek debts are classified as being in default.

A default, even when it is not called one, is an event that can have serious repercussions for a country’s economy and relations with other nations. Defaults can upset financial markets, create uncertainty for other lenders, and generally crimp economic activity.

Greece’s G.D.P. and Unemployment Rates in Europe

First quarter 2015 average; *Britain is the three-month average through February.

Source: Eurostat

How does the crisis affect the global financial system?

Europe is a union in which most real decision-making power, particularly on matters involving politically delicate things like money and migrants, rests with 28 national governments, each one beholden to its voters and taxpayers. This tension has grown only more acute since the January 1999 launch of the euro, which now binds 19 nations into a single currency zone watched over by the European Central Bank but leaves budget and tax policy in the hands of each country, an arrangement that some economists believe was doomed from the start. Since Greece’s debt crisis began in 2010, most international banks and foreign investors have sold their Greek bonds and other holdings, so they are no longer vulnerable to what happens in Greece. (Some private investors who subsequently plowed back into Greek bonds, betting on a comeback, regret that decision.)And in the meantime, the other crisis countries in the eurozone, like Portugal, Ireland and Spain, have taken steps to overhaul their economies and are much less vulnerable to market contagion than they were a few years ago.

Debt in the European Union

Gross government debt as a percentage of gross domestic product plotted through the fourth quarter of 2014.

What’s happening at Greece’s banks?

Greek banks are solvent on paper, but lending is practically at a standstill and they are not able to play the role they should in financing the economy.

On Sunday, the European Central Bank capped its emergency credit line for Greek banks at €89 billion. Most if not all of that money has already been used to cover withdrawals by customers, and there is virtually no money available for new loans. Banks have been closed for the week, with the exception of handing out partial pension payments to retirees.

After Cyprus’s banking system collapsed in 2013, it took two years for the Cypriot government to completely remove restrictions on bank transfers. And Cyprus had a eurozone bailout program in place — which Greece, after Tuesday, probably will not.

And if a Greek bank goes bust, it could create havoc in the financial markets, because Greece has not yet put in place European rules for the orderly shutdown of failed banks.

How likely is there to be a ‘Grexit’?At the height of the debt crisis a few years ago, many experts worried that Greece’s problems would spill over to the rest of the world. If Greece defaulted on its debt and exited the eurozone, they argued, it might create global financial shocks bigger than the collapse of Lehman Brothers did.Now, however, some people believe that if Greece were to leave the currency union, known as a “Grexit,” it wouldn’t be such a catastrophe. Europe has put up safeguards to limit the so-called financial contagion, in an effort to keep the problems from spreading to other countries. Greece, just a tiny part of the eurozone economy, could regain financial autonomy by leaving, these people contend — and the eurozone would actually be better off without a country that seems to constantly need its neighbors’ support.Others say that’s too simplistic a view. Despite the frustration of endless negotiations, European political leaders see a united Europe as an imperative. At the same time, they still haven’t fixed some of the biggest shortcomings of the eurozone’s structure by creating a more federal-style system of transferring money as needed among members — the way the United States does among its various states.Exiting the euro currency union and the European Union would also involve a legal minefield that no country has yet ventured to cross. There are also no provisions for departure, voluntary or forced, from the euro currency union.Investors may also still be betting that Greece will reach a deal with creditors before or after the referendum, particularly because polls indicate the majority of Greeks favor sticking with the euro.

How did Greece get to this point?

Greece became the epicenter of Europe’s debt crisis after Wall Street imploded in 2008. With global financial markets still reeling, Greece announced in October 2009 that it had been understating its deficit figures for years, raising alarms about the soundness of Greek finances.Suddenly, Greece was shut out from borrowing in the financial markets. By the spring of 2010, it was veering toward bankruptcy, which threatened to set off a new financial crisis.To avert calamity, the so-called troika — the International Monetary Fund, the European Central Bank and the European Commission — issued the first of two international bailouts for Greece, which would eventually total more than 240 billion euros, or about $264 billion at today’s exchange rates.The bailouts came with conditions. Lenders imposed harsh austerity terms, requiring deep budget cuts and steep tax increases. They also required Greece to overhaul its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business.If 

Greece has received billions in bailouts, why is there still a crisis?

The money was supposed to buy Greece time to stabilize its finances and quell market fears that the euro union itself could break up. While it has helped, Greece’s economic problems haven’t gone away. The economy has shrunk by a quarter in five years, and unemployment is above 25 percent.The bailout money mainly goes toward paying off Greece’s international loans, rather than making its way into the economy. And the government still has a staggering debt load that it cannot begin to pay down unless a recovery takes hold.Many economists, and many Greeks, blame the austerity measures for much of the country’s continuing problems. The leftist Syriza party rode to power this year promising to renegotiate the bailout; Mr. Tsipras said that austerity had created a “humanitarian crisis” in Greece.But the country’s exasperated creditors, especially Germany, blame Athens for failing to conduct the economic overhauls required under its bailout agreement. They don’t want to change the rules for Greece.As the debate rages, the only thing everyone agrees on is that Greece is yet again running out of money — and fast.