The Greek Crisis – The Top Three Options to Resolve the Greek Crisis
The Greek crisis has been a major topic of discussion for the last year. In this article, we’ll look at the snap election that Syriza won, the government that Tsipras formed with Independent Greeks, and the EU’s bailout. We’ll also examine the effect of austerity measures on the Greek economy. Then, we’ll look at the options available to resolve the Greek problem. Here are the top three.
Syriza won a snap election
According to the latest Greek election results, the governing party Syriza has won the most seats, but it fell short of an outright majority. After accepting the painful third bailout from the International Monetary Fund, Syriza is now seeking to form a coalition government with the right-wing Independent Greeks. The centre-right New Democracy, which won a large majority in the January elections, is the second-largest party, while the far-right Golden Dawn has a smaller share of the vote. The left-wing Popular Unity party, led by 26 SYRIZA defectors, did not reach the three percent threshold and is unlikely to receive any seats.
After a campaign of agitation and unrest, Syriza won a snap election in the country’s capital, Athens. This victory was celebrated by a wide array of people, including former Socialists and Communists. Both parties claim victory, but New Democracy still has the advantage of being the more progressive choice. The left-wing party is less threatening to Syriza’s chances of entering the European Parliament.
Tsipras won a coalition with the Independent Greeks
After a tense election campaign, the Independent Greeks and Syriza have won a government without the need for any euro-friendly centrist parties. Regardless of the outcome of this latest election, Tsipras will likely be encouraged by the result, given that the Greek government’s position on reforms has been controversial for some time. The Europeans have insisted that Greece make reforms or face bankruptcy, but Tsipras and his team have argued that without these reforms, the country would have had to leave the eurozone currency.
The Independent Greeks have also criticized the decision by Tsipras to renew a coalition with the right-wing Independent Greece. The new coalition is expected to consist of 155 seats, bringing the total number of coalition partners to 165. But the Socialists & Democrats have also criticised Tsipras for the decision. Despite their criticism, Tsipras still faces an uphill battle.
Greece’s bailout from the EU
The outcome of Greece’s bailout from the European Union was a mixed bag. The government agreed to a package of austerity measures, but other conditions have yet to be met. The country’s debt was extended by 1.8 percent, which is better than any other advanced country. Greece’s interest payments fell from EUR12 billion in 2009 to EUR6 billion in 2018, or 3.3 percent of GDP. The Europeans remained committed to providing additional bailout money if needed.
As part of the bailout agreement, the Greek government must implement further austerity and reforms. It must also be noted that the new prime minister’s election must be held in a month or so. Greece’s bailout was originally scheduled for June. In addition, new elections must be held by then. The center-right party has won thirty percent of the vote. The newly-elected government will be headed by economist Lucas Papademos. This move signals that the government is still committed to the bailout plan.
Impact of austerity measures on the economy
While austerity policies are a necessary evil in times of economic overheating, they are not appropriate when economies are already in trouble. For example, while currency devaluation can boost economies in trouble, Greece is sharing its currency with many trade partners, and their fiscal policies differ. A solution would be to increase public consumption and investment. An expanded direct public service job creation program would be beneficial for the Greek economy, and the authors argue that this is one of the best ways to restore the country’s financial health.
The sixth austerity package was approved by the Hellenic Parliament in February 2012. This program required that €325 million of the total EUR3.3 billion budget be identified as structural expenditure cuts. This was to be achieved through separate bills. It also required written commitments from the main party leaders to support the program. The final package also reduced the tax free threshold from EUR12,000 to EUR5,000. Further, the Hellenic Parliament had to approve the ‘quartet”s eleventh package.
Impact of austerity measures on public finances
The austerity measures in Greece are not just about economic reforms. In fact, there is a confidence vote in the Greek prime minister, who has to defend the bailout terms he passed without the support of one-third of his own party. The government, meanwhile, has characterized the measures as the punishment of heartless foreign creditors. A confidence vote would only add to the political turmoil in Greece.
In June 2015, the Greek government held a referendum on the proposed measures and the country’s people rejected them. The result was a failed attempt at a third bailout. Banks were closed for weeks, and Greece became the first developed country to miss repayment of its IMF loan on time, with a 20-day delay. At that time, the country’s debt was EUR323bn, or about EUR30,000 per person. The Greek government was not able to pay the IMF loan on time, and this led to a recession.
Impact of austerity measures on tax evasion
Greece has been implementing one of the most severe fiscal consolidation programmes in Europe for the past three years. This has caused a vicious cycle of deteriorating economic conditions, tax hikes, and debt repayments. This has also increased the risk of tax evasion as people become more vulnerable to the lure of lower taxes and lowered tax compliance. During the Greek crisis, there was no other way out of the crisis than austerity.
After the country’s borrowing rates rose to 10%, the government was forced to ask for bailout funds and budget cuts from other European countries. The Greek people asked, “How can we pay off our debts without a healthy economy?” The financial crisis created a dilemma of difficult choices. In May 2010, the Greek government was forced to implement a three-year bailout plan that imposed harsh austerity on its citizens and government. The plan called for higher taxes and a lower pension for Greek citizens. The new plan also required the government to reduce public sector wages, reform its pension system, and loosen its regulations to make the economy more competitive.