Greece To Adopt Austerity Measures

Greece has been facing this dilemma for quite long now and finally it has decided to go down the difficult road. The makings of the Greek debt crisis are beset in the politico-economic system that evolved over the times, including an overly invested public sector and a win-win nexus between the political leadership and trade unions. While this arrangement may have supported the political leadership, over a period of time, it seems to have disrupted public finances and forex industry that landed Greece into the crisis it faces today. The public sector in Greece accounts for nearly 40% of the nation’s GDP, something that is built on public investment and usually lags in providing reasonable returns on investment unlike the private sector, with focus on profitability. The result of this populist politico-economic model was a trebling of public debt as a percentage of the nation’s GDP from 28% in 1980 to 89% in 1990.

Having reached the point where the debt situation is that of a crisis, Greece is left with no option to borrow further from other nations, which it needs to do in a way that it has the capacity to pay it back. To do so, Greece needs to get its financial house and fx trading market in order and undertake effective austerity measures to make its finances manageable and sustainable in the long run. This implies hardship for its people and has led to nationwide protests, which later turned violent. amidst the protests and violence, the Greek parliament passed a bill announcing further austerity measures as required for the next tranche of funding outlined by Troika comprised of European nations, the International Monetary Fund and the European central Bank. many thousands of Greeks demonstrated outside the parliament even as the lawmakers debated on the new austerity measures. Even as one of the protestors died, the lawmakers approved the austerity bill by 154 in favor to 144 against it. The new bill is likely to result in job cuts by about 30,000 and reduction in wages and pensions of public sector workers. As per a report by the Troika, Greece was on the verge of bankruptcy and desperately required its sixth bailout package of eight billion Euros in order to avoid bankruptcy.

The Troika report, which was not endorsed by the IMF suggesting that there could be some differences within the group, stated that Greece was in troubled waters with its debt dynamics in a worrying situation. As per the report, most of economic indicators for the nation are in the red except for exports, which grew at 20%. overall, the nation’s GDP is expected to contract by 5.5% in 2011, a disheartening development and putting the Greeks into a further distressful situation.

If the Greek situation is not addressed, the crisis could spread to Italy and Spain amongst other nations and put the Euro in jeopardy. The possibility of such an eventuality seems to forced European nations to spearhead another bailout package for Greece. But, quite clearly, after so many bailouts offered to Greece, unless the nation shapes up its own finances, even the others will not be able to save the nation.

Greece To Adopt Austerity Measures

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