An ancient civilization from the pre-Biblical era, Greece is the cradle of western civilization; as such the birthplace of democracy, philosophy, and Olympic games.
In modern times, it was a developed country with a high-income economy and a very high standard of living. Greece was the founding member of Organisation for Economic Cooperation and development (OECD), member of North Atlantic Treaty Organisation (NATO), European Union (EU), International Monetary Fund (IMF) and the United Nations (UN). In fact, Greece was the Second largest defence spender after the United States within NATO.
But, now the Goliath is on it's toes; badly battered financially and socially. But what went wrong? Were the reasons of this debacle internal or external? These are the questions hounding everyone: considering the abject misery the greeks are subjected now!Well, it's mostly internal mismanagement (corruption, over-spending and deceit that has sent Greece into a downward spiral for almost a decade); with only one major external factor (gaining Euro as currency that Greece has no control over).
Since late 90's Greece was getting into fiscal deficits because of over expenditure by means of rich pensions for retirees, millitary expenditure, while failing to collect due taxes.Since Greece joined Euro club and replaced 'Drachma' with Euro in 2001; it was able to afford loans at a much cheaper rate from International institutions - awash with cheap loans, it splurged in abundance. For e.g: In 2004 olympics, it spent 8 times more than that of Sydney Olympics. Moreover, Greece had been indulging in accounting malpractices since long which eventually helped it gain entry into Euro - by covering it's prolonged fiscal deficits. Greece had paid millions in bribe to Wall Street banks including Goldman Sachs to fudge it's books and trick Eurozone community into believing in it's financial viability.
Thus, most of the blame lies on Greece but not all. Because the markets also failed to assess Greece's credit risk. Earlier 'Drachma' had been devaluing periodically to adjust trade imbalances, but that was not possible now; with Euro as currency controlled centrally by European Central Bank (ECB) in Brussels. Many including Nobel prize winning Economist 'Paul Krugman' believe this also a major contributing factor to the ongoing crisis. Greece Economy is in dire straits - since 2010 it has received numerous bailout packages from EU and IMF; which largely goes into repaying earlier debts and less into rebuilding Greek economy.
Following are a brief timeline of debt crisis and bailout packages:
2009, December - Greece's credit rating downgraded.
2010, February - Govt. announces tough austerity measures and faces public strike.
2011, July - European Union members channel a bailout package of 109 billion euros. Credit rating downgraded to substantial risk default.
2011, October - Eurozone lenders approve of 50% debt write off in return of further austerity measures.
2012, February - Greek parliament approves of a new round of austerity measures with a background of violent protests; for 130 billion euro bailout.
2015, August - Supposedly a bridging loan as part of 3rd round of bailout, of 7 billion euros; out of which 4.5 billion Greece will repay to European central bank and 1.5 billion to International monetary fund. This will pave the way for future bailout plans.
To sum up Greece is caught in a vicious cycle with no amount of bailout - able to make a dent in it. Compounding the problem are the harsh austerity measures (huge increase in taxes, drastically cutting down on pension, public welfare schemes), and widespread unemployment having contributed to great social instability. Over these years, Greece has been witness to many violent protests on the streets of Athens.
Fishing Industry, a major contributor to the GDP and employer to many fishermen is almost entirely broke; as Greeks can't afford to buy fish. Many harbors are lying empty and many a fishermen are without trade. Fishing that has been a Greek trade for thousands of years
|Small Fishing Village on Island of Crete|
Many shops in Athens have closed down as there are no buyers. Banks had become a casualty much earlier. Overall Greece is in a serious economic conundrum.
The way out: After all these years of turbulent trials, with ordinary Greeks being the worst sufferers for their Government misdoings, there has to be an end to this tragedy. The only way out it seems is an exit from 'Euro' (Grexit) and reintroducing Greek 'Drechma'. This will provide much-needed flexibility in devaluing it's own currency and making exports cheaper and competitive. This is bound to infuse stimulus into a shattered economy and mcuch needed respite to the Greeks.Paul Krugman who had been an outspoken opponent of single currency in Europe has said " Greek economy can recover from the severe recession by exiting the Euro and launching a new national currency, the drachma. ” he wrote in the New York Times in June.
While it may seem the only solution to the crisis, Euro Zone member countries are trying their level best to prevent this from happening. Because this will cause a crisis of faith in the European Union globally and worse, Euro would lose value against Dollar.
On a sombre note : Greeks and rest of the world are numb at irreversible greek tragedy; that is on the verge of turning into a spectre to haunt us forever, if not reversed soon!
Let us wait and watch when Greece gets fished out and by whom...