Should Greece STAY or Should It GO?
Greece's financial pressures may force it to abandon the Greek euro. Photo: Eduard Andras/Getty Images
The Greek Crisis is heading on a risky path towards resolution with its economic and political trouble. In the first place, this crisis began when Greece declared a budget deficit of 12.9% of GDP (Gross Domestic Pouch) in 2009. In 2010, Greece implemented a new austerity package to lower the cost of the GDP down to 3% in two years, for which the IMF (International Monetary Foundation) and the EU (European Union) gave €240 billion in emergency funds. They were meant to pay for their debts at the moment and was enough to keep the banks barely running, but these measures worsened the situation, slowing Greek economy, decreasing tax revenue, and raising unemployment. In 2011, €190bn were added by the EFSF (European Financial Stability Facility). By 2012, the debt-to-GDP ratio increased to 175%, 3 times more than the limit permitted by the EU (60%). Bondholders finally agreed to a “haircut” of $77bn in bonds for debts worth 75% less.
The resolutions that might be reached will be beneficial for Greece, however brief they may be. Some people are not in favor of the way Greece is getting its temporary resolutions, others believe that a more permanent solution for Greece is to leave the Eurozone temporarily and go back to the Eurozone when they have resolved all of their debt problems. However, that is not the resolution taken by Greece and Europe, as they have been given €86bn and have restarted bailout talks. The €86bn have allowed them to increase the limit of how much can be withdrawn from banks from €60 to €420. However, the limit increase also changes the fact that withdrawals can now only be made once per week.
On Wednesday, July 21, the Greek Parliament had a debate on whether or not they would implement new reforms in order to restart bailout talks. At 4:00 am local time on July 22, the debate ended with an overwhelming vote in favor of Tsipras and the bill for which the debate was held, with 230 votes in favor and 63 votes against the bill with 5 abstentions. The vote was in favor of Tsipras’ Syriza party, a Marxist left-wing party made up of various smaller political organizations, but were joined together when they believed that they could gain power. However, 31 of the against votes belonged to people in the Syriza party. Compared to an initial vote that took place one week before, this rebellion is a lot smaller. Negotiations with representatives from European institutions that shall provide the bailout funds are to begin on Friday, July 24.
Along with the new reforms, there would be more austerity measures placed on the people. These measures were meant more for structuring society for after the bailout. A code of civil protection aimed at accelerating the length of court cases would be included in these measures, where the court cases could not last for longer than a specific amount of time to find a resolution in a cold case between two people. The adoption of an EU directive to bolster banks and protect savers’ deposits of less than €100,000, and the introduction of rules that would see bank shareholders and creditors - not taxpayers - cover costs of a failed bank were also included in said austerity measures to attempt to keep economic stability. The EU directive is meant to ensure the safety of people with bank accounts that have less than €100k in their bank accounts. The responsibility of covering costs of failed banks in Greece, because of these austerity measures, would no longer be placed upon taxpayers, but instead will be placed on bank shareholders and creditors. Some issues, like early retirement and extra tax to be charged towards farmers living in the countryside, would have to be resolved in August since they have not been brought up previously.
The European Central Bank (ECB) has given €900 million to Greece for the second time in one week, arriving only hours before the vote on the bill was to begin. The IMF (International Monetary Foundation) confirmed that Greece was out of the red by paying its overdue payments of €2.05bn. Greece was also able to pay due to the fact that the ECB gave Greece a short-term loan of €7.16bn.
The next major Greek deadline is August 20, where it has to repay the remaining €3.2bn to the ECB and an additional debt of €1.5bn to the IMF during September.
Out of the €86bn bailout, the Greeks expect to get a €50bn Trust fund for privatising their assets. €7.16bn of the bailout will be from the bridging loan in order to cover immediate repayments to ECB and IMF and other debts made in July. €35bn will be used for growth and new jobs or the Greek people after the end of the crisis. However, some of the money may have been given to Greece, but it has not been spent yet.
http://www.irishtimes.com/business/economy/greece-submits-bill-needed-to-start-rescue-talks-1.2292095
http://www.bbc.com/news/world-europe-33631751
http://www.independent.co.uk/news/world/europe/syriza-everything-you-need-to-know-about-greeces-new-marxist-governing-party-10002197.html
http://useconomy.about.com/od/Europe/p/What-Is-The-Greece-Debt-Crisis.htm
Rafael Pico is the international correspondant of The Virge Times from San Juan, Puerto Rico
