Thursday late night, 18 May 2017, the Greek Parliament voted to accept another round of devastating troika (EC, IMF, ECB) conditions for an additional debt package of close to 5 billion euros. All of the 153 delegates of Alexis Tsipras’ Syriza-Anel coalition voted ‘en bloc’ for the suicide package, all 128 opposition members against. Nineteen didn’t show up. Perhaps they were too afraid to vote for the opposition. Just as a reminder, PM Tsipras, a socialist, is leading Syriza, Greece’s prominent left-wing party, that for reasons of majority decided to align with the extreme right-wing party ‘Anel’ which currently holds a mere 10 seats in Parliament.
Reuters reported earlier today that Greece and its European creditors agreed Monday to resume talks on what economic reforms the country must make next in order to get the money it needs to avoid bankruptcy and a potential exit from the euro this summer.
Greece has been trying to stay afloat ever since the financial crisis began in late 2009 as the government battled low growth rates, soaring inflation as well as high budget and trade deficits. That’s when the International Monetary Fund, the European Central Bank and the European Commission, also known as the troika of lenders, stepped in. But that came with a price. To date the government has had to slash spending by over 75 billion euros. Education, welfare and healthcare saw deep cuts.
The controversial and much discussed possible exit is often referred to as “Grexit”, a portmanteau combining the English words “Greek” and “exit”. The term “Graccident” (accidental Grexit) was coined for the case that Greece exited the EU and the euro without intention.
Starting from 2010, the seat of the Greek government was thus effectively transferred from Athens to Brussels, Washington and Berlin. Left in Greece itself was little more than the power to administer national policies and implement sovereign decisions made abroad.
People took to the streets as many lost their jobs, while others saw their pensions and salaries significantly decreased. To make matters worse Greeks were expected to contribute more since taxes and the overall cost of living went up. Homelessness and suicide rates skyrocketed as people couldn’t cope with their new reality. Greeks felt betrayed by their government for allowing the situation to get to breaking point.
In 2016 Greece has a new challenge – the refugee crisis. The country has shown great humanity to those who have lost everything despite the fact that Greeks are still suffering themselves. The Greek crisis doesn’t make international headlines the way it used to. Is it because the situation is improving or because people have lost hope that anything will change? After all, it was only a year and half ago when 61 percent of the population voted against the new bailout conditions proposed by the troika of lenders.
How do those people, the majority, who voted ‘No’ feel considering the prime minister ignored the majority and implemented even more austerity measures?
*With sources from RT.com
Provision of basic goods and services, such as food and heating, it is deprived by the 39.9% of the population living in Greece with this percentage rocketing to 44.5% for the 0-17 year old population. Moreover, almost one in five households ( 17.7%) live in inadequate, unsafe houses with a leaking roof with moisture in walls and floors etc.
Overall, more than 4.512 million Greeks are at risk of poverty (Population in Greece is estimated at 11 millions) with children most at risk. This situation is reflected by the fact that 230 774 children live in households with no workers and virtually no income!
These elements are included in the final report of September 2016 issued by the Greek Statistical Authority (ELSTAT) concerning the Living conditions in Greece.
Very often bad things happen to good economies.
Take as an example Finland. Its schools are among the best in the world, its government is among the least corrupt, and, for rich countries, its public debt is among the lowest. But despite the fact that the fundamentals of its economy are strong, its economy is not, in fact, strong.
The slightly longer version is Finland has had some bad luck that the euro has turned into a bad recession, or at least a worse one that it had to be. It started when Apple made Nokia go from being synonymous with smartphones to being synonymous with old smartphones. As Finland found out, it isn’t easy to replace a company that, at its peak, made up 4 percent of your economy. Obsolescence came for the timber companies next. There was nothing they could do to make people need as much paper, which until now had been a major export, in a post-paper world. And, on top of that, Finland has felt the effects of Russia, one of its biggest trading partners, staggering under the weight of low oil prices and Western sanctions. Put it all together, and Finland was always going to have a tough time. But it’s been tougher than it needed to be, since Finland hasn’t been able to do what a country would normally do in this situation: devalue its currency. That’s because Finland doesn’t have a currency to devalue. It has the euro.
. Well, it wouldn’t. What it would do, though, is make the rest of Finland’s economy competitive enough that things that aren’t strengths today would become ones tomorrow. It would also keep inflation from falling too much—it’s actually negative now—which, in turn, would make debts a little easier to pay back and keep households spending and businesses investing a little more. Think about it like this. Anytime a shock hits, whether that’s banks failing or an industry dying, the economy needs to cut costs to regain competitiveness. There are only two ways to do that: cut the value of the currency so wages aren’t worth as much, or cut wages themselves. Now, this might sound like a distinction without a difference, but it’s not. It’s a lot easier to cut one price (the exchange rate) than it is to cut millions of prices (people’s wages). And it’s a lot less painful, too. You don’t have to fire anyone to devalue the currency, but you do to make people take pay cuts.
Here’s where things get tricky, though. How much should we blame the euro for Finland’s problems, and how much we should blame, well, the problems themselves. After all, it’s not like the common currency had anything to do with the iPhone turning Nokia’s flip phones into little more than cultural artifacts. Although, on the other hand, it has had something to do with how long it’s taken Finland to adjust to this new reality. There’s no easy answer here. But what we can do, as Paul Krugman points out, is compare how Finland has done to a similar country that doesn’t use the euro—a country like Sweden. And that, as you can see below, is a pretty ugly picture. Finland and Sweden grew almost identical amounts between 1989 and 2008, before diverging 20 percent since then. The fairest conclusion is that, given that so much has befallen it, Finland would have fallen behind even if it’d kept its old currency, the markka, but that it’s fallen even more than that because the euro has taken away its ability to do anything about everything that has happened to it. All it can do is try to cut costs ever more religiously. But facts are no match for faith, and Finland has plenty of that in its economic strategy. Finnish finance minister Alexander Stubb told the New York Times’ Neil Irwin that “devaluation is a little like doping in sports” in that “it gives you a short-term boost, but in the long run, it’s not beneficial.” The problem is that although this sounds like a cost-benefit analysis, it’s more a moral one. It’s really pooh-poohing devaluation as the easy way out. But why shouldn’t we want that? The two best things about the easy way out are that it’s easy and is, in fact, a way out. Finland could use one of those given that its economy is still 5 percent smaller than it was in 2008.
The only way the euro could possibly be worth it is if it helped Finland more before the crash than it’s hurt Finland since. That’s a hard case to make, though, considering that Sweden did just as well without the euro as Finland did with it during that time.