By: Danielle Apfel
In the aftermath of the bailout talks which ended last Thursday, Greece remains on rocky waters. Since the new government entered the playing field this past January, Syriza has challenged the austerity measures placed on the indebted country in exchange for international credit and loans. Their failure to cooperate and appeal to international creditors escalated so much so that after weeks of intense meetings, the IMF decided to walk out of the talks altogether.
In 2001, Greece stepped up to join the Eurozone in order to gain legitimacy in global markets and trade. To do so, Greece needed to prove itself capable of being fully integrated into a more complex and risky system, by showing that its budget was in check. Despite the evidence, Greece’s records were not as clean as they promised. After joining the Eurozone, public sector wages rose and pension spending increased. Coupled with a low retirement age of 58, predictable tax evasion, and the market crisis in 2008, Greece’s economy took a huge hit.
After the financial crisis, Greece was forced to call on its neighbors and friends for help. The “troika,” or compilation of helpers, is composed of the IMF, the ECB, and other Eurozone members, like Germany. In exchange for large bailouts and assistance, Greece promised to implement austerity measures, such as public sector layoffs, pension cuts, and enforceable tax increases; measures that most Greeks were unhappy to comply with.
Cue the Syriza. Their popularity is based on their determination to increase living standards and employment while denying the implementation of the required Eurozone measures. Yet still, they ask for more bailouts.
Greece’s refusal to compromise over market reforms is alienating the country from the rest of the global market. Although the IMF is always open to last-resort aid, its representatives left the table last week when it appeared that Greece’s negotiators remained staunch in their refusal to make the necessary concessions.
Members of the Eurozone are nervous, and rightly so, as Greece owes an estimated €320 billion in loans. Eurozone finance ministers and the IMF managing director will meet later this week in Luxembourg to discuss potential plans moving forward.
Though Greece has constantly refuted the idea of increasing austerity measures imposed by its creditors, the events of this past week has perhaps jolted their stance. While open to more concessions than usual, Greek negotiators have insisted on immutable positions, such as EU and IMF labor reforms, cuts in state pension costs, and a 1% budget surplus.
Tensions are high, as a fair compromise remains unreachable. While it is unfair of Greece to continue asking for aid in billions of dollars when measures are not taken to make the country more self-sufficient, should the Eurozone let Greece default and fail?
A lot is uncertain when it comes to a comparable solution, but there is no doubt that should Greece go down, the euro will hurt, the global market will drop, and the Greek people will suffer.