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Where it All Started
In 1981, Greece joined the European Union (EU) as a way to establish itself in the promising idea of a coordinated Europe. With European countries trading in a tariff-free zone and with the goal of a future common currency, the appeal was understandable. In 1999, that common currency, the Euro, was introduced although it was not circulated through its member countries until 2002. In 2004, Greece adopted the Euro and gained significant access to capital. With Greece using the same currency as, for example, Germany, their exposure to open markets and lines of credit was substantial and habit forming. With Greece expecting to host the summer Olympic games in 2004, a period of strong tourism and employment ensued. Times were good.
Later in 2004, the European Commission verbally lashed Greece for falsifying documents to cover-up budget deficits that would have
prevented it from adopting the Euro. Note: a pattern of deficit spending
and misrepresentation was established, but no corrective measures were taken by EU politicians. From 2005 until 2009, a series of Greek budget reforms were proposed and some implemented. Many of these budget reforms reduced citizen benefits and led to significant, country-wide labor strikes and riots, often resulting in reducing or overturning the reforms. All the while the notorious inability of the Greeks to collect taxes provided little support for the expenditures. Note: budget problems were clearly recognized, but Greek political leaders often took the easy road. The politicians facilitated a situation where Greek citizens enjoyed a bounty of generous entitlements while simultaneously paying little into the system. The Greek population experienced what it thought was a new and better economy with the help of the Euro currency. Though they may have had good intentions when making these choices, Greek politicians either did not recognize or ignored the massive debt burden that was growing.
The Aftermath
The global financial crisis hit in late 2008 and shortly after, in 2009, the socialist party took over in Greece. They recognized the budget problems immediately and quickly began implementing reforms. Cuts to entitlement programs, wage reductions and tax increases (i.e. austerity measures) were passed. Greece did not have the money to pay its own public workers. They needed money from the European Union, who made it clear the only way to get that money was to reduce spending, and increase tax revenue at a pace to their liking...in other words, now! The affect of these cuts on the economy is palpable. Unemployment in Greece is over 20% with youth unemployment (under age 25) over 50%. Emigration is up as wealthy Greeks leave the country, as are many in the younger generation with the means to move. Depositors are withdrawing cash from already weak Greek banks. Consumer spending is down dramatically resulting in 80,000 businesses closing in 2011. Homelessness is up by 25%. Suicide and depression are up by similar amounts. Greeks who refer to themselves as "suffering" now represent 25% of the population. Nearly 60% refer to themselves as "struggling" while only 16% are "thriving". Robbery is up over 100%.
Greece is an economic disaster, and for all but the political and financial elite, that means it is a social disaster as well. If Greece stays with the Euro currency, it will mean an entire generation will be subjugated by their northern European neighbors for "saving" the country. If they leave the Euro, the short-term pain will be extremely severe as Greece will have to manage its finances on its own. Their money will be nearly worthless to world trade. Strikes and riots would be just the beginning of the social unrest. Their intentions may have been good, but the choices made by Greek politicians over the last decade don't justify the social tragedy now unfolding. |
