What They Forgot to Mention
When Wall Street imploded in 2008, the Greek government took the opportunity to announce that it had been understanding its deficit figures for years. This raised the concerns over Greek finances and caused many to be alarmed at the soundness of the Greek economy.
This news took the EU markets by storm, effectively eliminating any prospects that Greece might have had to borrow to meet its obligations, causing further turmoil and driving the country to a new financial crisis.
The so-called troika—the IMF, the European Commission, and the European Central Bank—issued the first of two bailouts for Greece, adding more than 240 billion euros to the economy in order to avert a calamity.
These two bailouts were not without several conditions, primary among them was the insistence on harsh austerity terms, requiring serious budget cuts and sharp tax increases. They also called for a restructuring and streamlining of the Greek economy, putting an end to tax evasion, and making Greece a place where it was easier to do business.
The long-term purpose of these actions was designed to give Greece time to stabilize its financial picture and put an end to fears that the EU would quickly unravel. These actions have helped Greece deal with many of its problems, but they are a long way from being over. The Greek economy continues to shrink and the unemployment rate continues to hover at about 25 percent.
The funds that were provided to Greece went largely to satisfy international loans. In fact, very little went into the effort to shore up the Greek economy. To make matters worse, unless a recovery is able to take hold, the country still has a staggering debt to pay.
If the country was to make a comeback, it would need to continue to institute deep changes to its economy. It will also need to unwind many of the capital controls instituted by the government in the face of the run on the central banks last year.
Needless to say, the relationship of Greece with the rest of the EU is delicate. Greece continues to have its economic woes, European leaders continue to be impatient for Greek authorities to implement changes, and the Greeks continue to hold onto measures that should have been changed long ago.