The financial crisis in Greece that began in 2009 shortly after the Global Financial Crisis is a disaster that is still going on today and has created quite a substantial mess of the country’s economy.
In 2009, while Europe was still trying to recover from the global market crash, Greece announced that it had been understating its deficit figures for years which, rightly, panicked a lot of people and soon after Greece’s credit rating was downgraded by all three of the big credit rating agencies.
In 2010, on the verge of bankruptcy, the International Monetary Fund and the EU agreed to participate in bailing Greece out of its huge debt if the country complied with issuing a number of austerity packages, which it did in return for the first bailout package of €110bn over three years.
Over the next three years seven austerity packages were issued which caused riots and outrage among Greek citizens. Measures in these packages included:
- Increasing retirement age from 60 to 67
- 10% cuts on salaries about €1800
- Increasing working hours of teachers with no additional pay
- Public pensions cut on average between 5% and 15%
- Public salary wage cuts up to 30%
- Abolishing 15000 state jobs making it easier to fire civil servants
There have been violent protests all over Greece since the austerity packages were announced, with one man even committing suicide a short distance from Greece’s parliament in an act of protest which later became a symbol for anti-austerity groups and resulted in many violent clashes between protestors and police.
As of 2015 Greece has been leant around €240bn from the IMF and the EU and still has a whopping debt of €317bn. Whether Greece will ever recover from this crisis is difficult to predict. With a proper plan of action and constant guidance from the IMF and the World Bank, Greece could eventually one day settle its debt. However the government will need the full support of its citizens so introducing more riot-causing austerity packages is not the best idea. Although the EU and the IMF have attempted on a number of occasions to bail Greece out, the money has not been used efficiently. The money has been used to pay of international loans rather than rebooting Greece’s economy and actually allowing money to make its way back into the country through businesses. A proportion of the loans should have been used to rebuild the economy which would also provide more jobs in the country, which are essential now that the unemployment level has risen above 26% and youth unemployment is around 50%.
There is also the debate over whether Greece should remain in the EU. For now the answer is yes, Greece must stay, however difficult that may be. Leaving the EU would be far worse for the country as this would cause them to be shut out of the global capital markets meaning the economy would sink even lower. Trading would be off limits for Greece and the country would be in even bigger trouble as that time they wouldn’t have the EU to fall back on and be bailed out by. Furthermore if Greece left the EU they would have to change their currency back to the drachma which would only create further chaos and disruption as the drachma would lose value and most likely cause inflation.
Overall, there is a chance that Greece may eventually recover from this financial crisis but first it must rebuild its economy and begin to increase trading again whilst negotiating with the EU and the IMF about extensions on paying back outstanding debts.