Hundreds of billions of euros haven’t solved the Greek crisis. Will 8 billion more do much good?
It’s not just about the money: it’s the T&Cs which are making life difficult for Greeks
Life for Greeks has, to put it very mildly, not been easy for the past seven years. 30 per cent of the country is living in poverty, over half of young people are unemployed, and former middle class professionals who used to work in an office in a suit and tie are lining up in soup kitchens to feed their families.
The country has already received €240bn in what’s known as ‘bailout money’ from the EU. In 2015, it was promised another €86bn, but that money would only be released bit by bit if Greece proved it was putting a series of changes in the way they managed their budget into place which the EU said were necessary before they’d trust them with the cash.
Yesterday, government reps from Greece, the rest of the Eurozone (the countries who use the Euro), and the International Monetary Fund (who are responsible for paying out loans to countries in a lot of debt) met up to try and agree on how much more money to give Greece this summer.
The meeting was kind of successful: €8.5bn of the €86bn was approved, a huge relief for the Greek government. But although these numbers sound huge, it still leaves the country a long way from getting everyone back into work and the welfare system back into gear again.
How things got so bad in the first place...
Greece’s economy has been a seriously messy story for a long time.
One place to start is with the Greek government themselves, who essentially spent a lot more than they had in the years before the crisis, and couldn’t hide the debt anymore afterwards. The thing is, almost every country in the world operates on what’s called a
– i.e. having a gap between how much you take in and how much you spend – and not everyone agrees it’s a problem.
But in Greece, this ‘deficit’ was just one part of a whole range of problems with the way the government managed its money. Huge amounts of corruption, people avoiding their taxes, and very high pensions and wages for people working in civil service all played a part in creating a pretty unsustainable economic situation for the country.
So in 2009, the Greek government came out and said “Okay, that deficit we told you about is actually a lot bigger than we said it was.” Which made investors and banks who used to put their money into Greece take it right back out again, because they didn’t trust the government – which is fair enough, except it obviously made things even worse for the Greeks.
Since then, what’s known as the ‘troika’ – three big international financial institutions called the International Monetary Fund, the European Central Bank and the European Commission, with Germany having a particularly loud voice in the conversation – are trying to force the Greek government to reduce its spending, prove it’s able to manage its money so that it earns more than it spends and restore its status as a ‘creditworthy’ country.
...and whether anyone’s managed to fix it
All around the world, from the UK, to Greece, to Brazil, we’ve been hearing the same word again and again since 2008: austerity. The main idea is less spending to bring deficits like the Greek one back into balance and reduce the debt that countries owe.
And yet, almost all of the money that Greece has saved from not spending on government programmes, and received from international loans, has gone right back out of the country again to pay back the international bodies it owes money to.
That’s why even after being lent €300bn in cash, poverty and unemployment are still such a huge issue in Greece. Health spending has been cut by half, education by a fifth, and pensions are lower than ever.
But it’s not enough to get things going again – and until Greeks feel financially secure enough to do things like set up a business or make an investment here and there, it won’t be.
Can’t we just forgive and forget?
After years of hardship, the country’s prime minister Alexis Tsipras is calling on international organizations to just forgive and forget the rest of the debt, allow Greeks to take the money from international loans themselves rather than paying it back to lenders, and get moving again.
The International Monetary Fund is totally on board with this – it’s mainly the Germans who are hesitant. They won’t let go of this idea that Greece must earn more than it spends before it can be ‘trusted’ to stand on its own two feet (the ‘austerity’ thing.)
The next step is to see how the country deals with the money it’s getting this July. If it spends it wisely (in the Germans’ eyes, anyway), they might just agree to forget about some of the remaining debt – what’s known as ‘debt relief’.
Like a lot of big economic decisions, it comes down to a question of values in the end – whether learning to ‘live within your means’ is the most important thing for an economy, or whether day to day business can continue even with some debt on the books.