The Greek Debt Crisis needs to be seen through the eyes of people. The outside world has a tendency to focus on the Greek Debt Crisis as an issue for the nation of Greece, or of the EU.
During the global financial crisis of 2008, a credit crunch, the sudden and sharp reduction in how much credit is available from banks, led investors to discover that the Greek government had misreported statistics so that the Greek economic situation looked much more stable than it actually was. As investors raced to pull their stocks and other resources out of the Greek economy, the Greek economic situation worsened until it threatened to collapse.
The resulting 110 billion euros in bailout funds by the troika—the International Monetary Fund (IMF), European Central Bank (ECB) and European Commission—in 2010 came with the catch of austerity measures that would require budget cuts to social welfare spending and pension programs. The Greeks agreed.
In 2012, the threat of a Greek economic collapse rose again, and the troika handed the Greeks another 100 billion euros, along with more austerity measures. Once again, the Greeks agreed.
Meanwhile, Greece’s citizens were suffering. The age of retirement was pushed back. Government workers were laid off. According to a 2013 video by the New York Times, the Greek government raised taxes on heating oil by 450 percent alone, leading people to use dirty and environmentally dangerous alternatives for heat. Greece had an unnegotiable $1.7 billion IMF payment coming up on June 30, 2015, so politicians passed even more stringent cuts.The Greek population was desperate for an end to the austerity measures as they continued to impact their daily lives.
On January 25, 2015, the radical left wing party Syriza won the majority of votes in the Greek parliament elections. Its leader Alexis Tsipras became prime minister. Syriza had campaigned successfully on the promise of ending the crisis with the implementation of the Thessaloniki Program.
The Thessaloniki Program calls the Greek debt crisis a “humanitarian crisis” and advocates for a “comprehensive grid of emergency interventions, so as to raise a shield of protection for the most vulnerable social strata.” The cost of such emergency interventions? An estimated 1,882 billion euros. Not surprisingly, the proposal has been criticized by both opposition and party members.
Putting the cost of the Thessaloniki Program aside, Greece still owes double the country’s annual economic output. That’s more than 240 billion euros, or about $264 billion at today’s exchange rates, plus interest to its creditors: 63 billion euros to private lenders, and a 195 billion euro debt on the bailouts, including 57 billion from Germany and 43 billion from France. It would be a hard road to repay such debt.
According to the New York Times, the Greek government doesn’t have to make any payments on 200 billion euros of its debt until 2023, and the IMF has proposed extending the grace period until 2050. Greece has defaulted on the $1.7 billion IMF payment, and the ECB has been putting pressure on the repayment of the bonds it procured for Greece during the worst of the 2008 financial crisis.
On July 5, 2015, the Greek government held a referendum to decide whether Greece was to accept the bailout conditions proposed by the troika on June 25. In a move that shocked the world, which had expected a repeat of 2010 and 2012, the Greek people voted NO.
As a result, Greece must work on the negotiations surrounding the austerity measures that still exist, as well as the unintended consequences of the Greek government’s actions on its citizens. The first week of July, Greek citizens, both in the country and abroad, found their accounts frozen by the Greek government to prevent bank runs. Limits on withdrawals continue. According to Endeavour Greece, a non-profit group that supports entrepreneurs,
Greek businesses are finding it difficult to procure resources and offices abroad, while investors in Greek businesses are pulling out.
Whether the Greek government chooses to exit the European Union and hope that the resulting deflation would spike exports, or to stay and take out more loans from the troika, experts predict a difficult adjustment period for both the nation and the people.