If you keep up with international news, you’ll probably have heard that there’s a whole lotta stuff going on in Greece at the moment and, if you’re like me, you’re probably totally confused by it all. It’s ok, politics and finance aren’t easy concepts to grasp, especially when things aren’t going as they should be. Fret no more, I’ve done the hard graft and have put this piece together which should, in the most succinct way possible, shed some light on the subject and help you wonderfully curious Smart Girls to better understand the gravitas of Greece’s current financial and political situation and how it affects, not just them, but the rest of the EU.
So, let’s start from the beginning (a very good place to start): Greece joined the European Union in 1981 and was welcomed into the eurozone (countries that use the Euro as official currency) in 2002. Despite already harbouring heavy debts at that time, hopes were high for Greece’s growing economy and everything was pretty much fine and dandy until the financial crisis hit in 2008. Due to Greece being one of the poorest countries in the EU and already battling this high rate of debt, it suffered substantially during the recession. This was further worsened by their monetary policy, which obliges them to follow the same policies as the rest of Europe and greatly favours the much wealthier and dominant German economy.
As a result, Greece had to take out loans from the European Commission, the European Central Bank and the International Monetary Fund in order to get by and see out the recession. Unfortunately, in order to pay back the staggering amount of money it owes, Greece has had to enforce a number of austerity measures (spending cuts, increased taxes etc.), which have greatly hurt the development of the Greek nation and the quality of living for the Greek people. To give you an idea, Greeks have been limited to a maximum ATM cash withdrawal of €60 per day. Crazy, right?! To make matters even worse, its financial depression means that Greece is finding it even more difficult to raise the money it needs to get itself out of its crippling debt. It’s basically one massive, vicious and unrelenting cycle.
What’s being done about this? I hear you ask. Well, the newly elected, left-wing Syriza government and Prime Minister, Alexis Tsipras, have been hoping to renegotiate their debt repayments with the Troika (the European Commission, the European Central Bank and the International Monetary Fund) in the hopes of making life a little easier on the Greeks. The European lenders aren’t quite so open to this idea, however. To some extent, it’s understandable; it’s the wealthier European taxpayers that are fronting up for most of the loans, which means their governments aren’t too keen on the idea of easing up on the repayments. On the flip side, as part of a unified European financial economy, nobody wants to see Greece collapse as this will hugely affect the economy of Europe as a whole and, subsequently, the rest of the world. Ok, are you all still with me? Good.
Having made history by being the first country to miss a crucial repayment to the IMF, Greece held a referendum on July 5th on whether to accept or reject a bailout proposal from the Troika. An acceptance of the referendum would have been a ‘yes’ to further austerity measures, however, a majority of 61.31%, backed by the Syriza government, voted to reject the bailout, sick and tired of effectively being prisoners to their creditors. Ok, so that means that things might get a little easier for Greece, right? Well, not necessarily. Having encouraged his people to reject bailout plans, Tsipras signed the very measures he was, only weeks ago, urging Greeks to reject. So, basically, despite Greece voting ‘no’ to further austerity measures, their government has effectively still said ‘yes’ to more tax and VAT increases, public pay cuts, privatisation and a phasing out of early retirement. I mean, what?!
Whilst there are now feelings of disillusionment towards Tsipras, his supporters maintain that the referendum was not a waste and was, instead, a way for him to assert power and prove that he can continue to negotiate with the northern elite, rather than falling victim to their every command and simply saying ‘yes’ right from the get-go.
So, what now? Well, the future is, unsurprisingly, unclear. Overall, there seems to be a lot of sympathy for Greece amongst the general European public, but little mercy is being shown from other European governments and the Troika. Whilst Greece aren’t completely blameless, with their history of tax evasion and reckless over-spending, many believe that Germany and other financially dominant countries are being too hard on Greece and are acting selfishly, contradicting the very aim of the EU and the eurozone: to be unified and prosper together as well as helping one another out in times of need.