Politics / Tax

Good grief Greece, what’s next?

Destruction, uncertainty, and change filled the air Monday in Athens between the rioters on the street and lawmakers in parliament. Members of parliament voted 199 in favor, 74 against and 27 abstentions of cutting minimum wage by about 22% and laying off one fifth of civil servants, about 15,000 workers.[1] Trying to obtain a €130 billion ($172 billion) bailout, Greece is trying to save its economy while also fighting to keep its place in the European Union. European financial ministers will meet on February 15th to discuss sending Greece more aid to assist their recovery.[2] Creditors and other financial lenders are trying to prevent Greece from defaulting into bankruptcy, which could pull down other Euro supported countries. They are also actively working to erase debt owed to private lenders and bondholders.[1]

The extreme budget cuts and billions needed in bailouts provoked a crowed of over 80,000 rioters in Athens and over 20,000 elsewhere Sunday night.[3] Scenes from Sunday’s riots including the destruction and torching of over 45 local businesses and historic buildings and fights in the streets have spread quickly. The violence and outbursts among Greek citizens occurred around the country from Northern Greece to tourist spots such as Crete. It is estimated that 170 people were injured, 70 protestors were hospitalized and 1o6 police officers were wounded from the objects and makeshift bombs thrown at them.[3] The police estimated that 74 people were arrested and another 92 were detained. [3] The Prime Minister, Lucas Papademos, responded to the situation saying “Vandalism, violence and destruction have no place in a democratic country and won’t be tolerated.”[4]

Protestors are outraged by the continuous deep pay cuts and layoffs in an already tough economic time. Greece, like many other parts of the world, are struggling with an economic recession, little growth and 21% unemployment that continues to rise.[1] The protestors also believe that cutting the budget and receiving bailouts will decrease independence among other European Union countries and will force Greeks to remain in poverty.[4]

On the contrary, German Finance Minister, Wolfgang Scheauble, confirmed that Germany and the EU would continue their support to keep Greece in the Eurozone and that it is ultimately Greece’s choice to keep the single currency.[5] Scheauble is quoted saying, “We’re happy to help but we shouldn’t give others the feeling that they don’t have to work hard themselves. Every country is responsible for itself.”[5]   It is Greece’s responsibility to remain as competitive as the other EU member countries.

The European Union does not want Greece to default on their loans because the EU fears it could lead to a domino effect of other countries defaulting. Ireland and Portugal have also been having budgetary problems and are waiting to see how Greece will fight this battle. If Greece leaves or is forced to exit the EU, there is a chance that countries with unsustainable budgets, like Ireland or Portugal, could eventually follow.[6]  It is in the EU’s best interest to resolve or at least contain the economic problems in Greece in order to keep the Euro safe and markets competitive.

–Catherine Kus

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