During the last five-and-half years, the government of Greece has attempted to walk a tightrope between it’s national interests and external creditors. During each iteration of the credit crisis, Greece has given into the demands of the IMF and EU, slicing its budget, instituting “market” reforms and overall, towing the austerity line.
Finally, the patience of the Greek people, exhausted by catastrophically high unemployment, an eviscerated social safety net and no prospects for improvement in the economy climate, may be running out. Greece is scrambling for cash to repay loans that are now due, and crisis is again front and center.
This all to easily could result in Grexit, a Greek exit from the European Union and the Euro Zone, an outcome that should and could still be avoided.
While we here in the U.S. undoubtedly suffered through the financial crisis and still operate in an economy that is not back to “normal,” I think it’s difficult to appreciate what the Greek people are still suffering through, including:
- More than one-quarter of all Greeks (26.5 percent) are unemployed, with youth unemployment standing at 52.4 percent and the jobless rating for the long-term unemployed at 73.5 percent.
- An economic recession that lasted six years and which may very likely extend into the seventh year, as growth in the first quarter came in an an anemic 0.5 percent.
- Persistent deflation, which has lasted for more than two years, with prices most recently falling by 2.1 percent year-over-year.
The human cost of imposing austerity has been tragic, despite the assumptions by the IMF and EU that the Greek economy would bounce back quickly, as detailed by Paul Krugman in this January column. Austerity is a failed policy that never had any legitimacy and has destroyed too many lives already.
Greece needs help, not another kick where it counts. Potential actions that could actually help Greece and it’s creditors include extending debt repayment deadlines, cutting interest rates, reinstating access to credit lines for Greek banks and actually cutting the size of the debt owed. These solutions could actually provide the Greek economy with a chance to grow again, increasing employment and creating a welcoming environment for investment.
Such a solution would benefit not only the Greek economy and the Greek people, but the EU, the Euro Zone, the IMF, the European economy and the global economy. Punitive measures haven’t worked, and it’s time to try something that actually might change the dire Greek economic situation.