Rock And A Hard Place - 18 July 2013

To an extent, you have to feel sorry for the Greek government since they were not the people who ignited the European Sovereign debt crisis by lying over the state of the Greek economy and fudging the convergence issues to allow Greece to join the Euro. When these facts came to light in the depths of the Global Financial crisis just when the nation needed to secure addition funding from the markets, searching questions were asked about her ability to meet existing obligations, touching off the European Sovereign debt crisis and requiring Greece to go cap in hand to the EU and IMF for two bailouts to avoid bankruptcy and an inevitable and catastrophic exit from the single currency (for Greeks, at any rate).

The two bailouts came with strings attached which were designed to put the Greek economy on a stable trajectory and also reduce the public deficit to a maximum of 3% of the Nation’s GDP, as required by the convergence criteria. This has led to a painful set of austerity measures for the Greek people, involving reduction of benefits (notably in the public sector), employment reforms and reductions in redundancy measures. At the heart of the Greek difficulties lies the belief that tax is optional for some people. To put their house in order, the Greeks have to ensure that everybody pays taxes due. Equally, certain state run companies need to be privatised or reformed. These measures are in the long-term interest of Greece and should have been implemented by the Greeks long ago rather than be imposed from outside.

In the latest of these unpopular moves, parliament has narrowly approved further public sector reforms by 153 votes to 140. In the end, Greek politicians had little choice since failure to do so would have put the next tranche of EU/IMF funding in jeopardy worth €6.8 billion. Without the funding, Greece would risk a default which would only exacerbate its current, all too serious difficulties.