While the Global Financial Crisis (GFC) may be old news, countries, such as Greece, are still being battered by its effects. Things are finally coming to a head in Greece, so let me backtrack and explain the history of the crisis, and what’s currently happening.
Greece was invited to join the eurozone in the early 2000s, with one of the conditions being that bank balances have to be in check. Greece pretended they were compliant, and were accepted. Eager and excited, they began to enforce changes, such as lowering the retirement age to 58, increasing social benefits, and raising wages for public sector employees. This was all done with money they borrowed - i.e. money they didn’t really have.
The GFC put Greece in an even worse position, and in 2009, when Greece realised their finances were really in the shit, they revealed they had actually been understating their deficit figures for years.
To avoid another GFC, the troika (the International Monetary Fund, the European Central Bank, and the European Commission) issued two bailouts for the country. In exchange, they said that Greece had to enforce austerity measures - in other words; raise taxes, cut benefits, so as to increase revenue into the country and decrease spending.
However, this hasn’t really helped Greece, as the money went towards international loans. Greek living standards decreased as a result, and now more than a quarter of the population is unemployed.
Greek party, Syriza, came to power at the start of this year claiming that these austerity measures were the problem, and that they were going to fix Greece’s economy. However, Greece’s creditors believe that Greece didn’t make enough changes in terms of austerity, which is why they are yet to come out of this slump.
June 30th was the date that Greece were meant to pay back its debts. That date has been and gone, and no debts have been paid.
Last week, a meeting was held between European leaders, and Greece were meant to bring with them a plan that would outline how they were going to get out of this predicament. However, they turned up empty handed and their European neighbours were unimpressed. Greece has been angling for some debt relief, but Europe says that the country needs to instead take responsibility for the mess it is in.
All 28 European Union leaders gathered this weekend for what was labelled ‘the final summit’. There were uncertainties over whether Greece would be granted a third bailout, or if they could keep the euro as their currency. This was because fellow international leaders were unsure whether they could trust Alexis Tsipras (Greek’s PM) to stick to a real plan of reform after an inability to keep promises over the last few years. However, after a mammoth 17-hour deliberation, it was decided that Greece would be given the bailout and keep the euro. President of the European Council, Donald Tusk, says the bailout will involve “serious reforms” and “financial support”. Greece has to pass these reforms (such as tax increases and a debt repayment fund) this week. Hopefully with these changes, and more to come over the next few months, Greece will makes its way towards a better, brighter future.