The Greek Debt Crisis: Explained

These images of graffiti aren’t just an expression for artistic value.

Picture: Petros Giannakouris / AP Photo

Picture: Petros Giannakouris / AP Photo

Rather, they are a depiction of the anger, frustration and weariness experienced by Greeks all over as the fate of their country lies uncertain and in speculation. You have probably heard, read or seen some news on the economic crisis happening Greece, but may not be fully aware of the breadth of the situation. So let’s start back in 2009.

As everyone knows, the global financial crisis hit hard. But this isn’t what brought Greece down to its dire state. Instead, it mere exacerbated the situation. To keep things short, lets apply the typical political scandals we see on TV all the time. That is, years of overspending, political infighting, tax evasion, denial, corruption acts, and more, revealed that the Greek budget deficit was too high (4x that accepted by the E.U) – meaning that the government spent way more than they actually got back in taxes. This led to the revelation of their debts: 300bn euros.

Picture: Petros Giannakouris / AP Photo

So, in 2010, Greece received its first bailout from the International Monetary Fund (IMF). Having pretty much no money, the country risked defaulting in 2011 and getting the record for the first developed nation to fail to pay back their loans. Definitely not a blue ribbon anyone wants. Hence, in 2012, a second bailout was given at a small sum of 130 billion euros to keep Greece on its feet.

Now, being part of the European Union entails strict, and I mean strict, rules and regulations – austerity measures. Following the loan came a flow of spending cuts to pensions and public services, prompting the riots you may or may not remember in Greek streets.

This brings us to today.

Picture: Yorgos Karahalis / Bloomberg

Throughout the past few years, back-and-forth talks between Greece and its creditors have resulted in indecision, uncertainty, and more protests.

Austerity measures are being argued for on both sides. They’re either necessary, as some see the Greek government (which has gone under new leadership earlier this year) needing discipline in their spending, or illegitimate, as others believe that these harsh measures have only worsened the lives of Greek citizens. Unemployment has risen, resulting in the flight of young, bright students to other countries in hopes for a job. Pensions are being slashed, making it harder for the retirees (which make up a decent proportion of the population, since the retirement age is earlier than other countries) to stop working. With these cuts also come fewer social services, meaning that the government can’t really help their people.

Picture: Aris Messinisaris / AFP Photo

During the last week of June, Greece was approaching yet another payment deadline. Even though it was only 1.8bn euros, something capable by most, Greece really is broke, as its cash reserves and banks become dangerously low. Asking for another bailout, it’s third in five years, is an option they are persisting, but not the most favorable to the E.U.  

This is the deadline we’ve been hearing about and seeing all over the news. If Greece did not manage to pay off the 1.8bn euros (which they did not), it was a default and possible “Grexit.” In the case of a “Grexit,” – a Greek exit – the country would disband from the European Union, having to create a (worthless) currency of their own, and handle their debts and social issues all by themselves.

Of course, this does not reflect well upon the country. But neither does it look good upon the European Union. It contradicts the definition of union itself. If these countries cannot band together and produce a working system, it shows political and social failures on all parts; it shows a failing democracy, something more drastic and dire than economic sanctions. Not to mention the fact that economic upheavals and unrest may or may not (most likely may) ripple through the Eurozone due to Greece’s departure, as Portugal, Ireland and Italy see themselves following down the same path.

Picture: Petros Giannakouris / AP Photo

However, though Greece didn’t make the payment, they didn’t default either. By now, we should all be used to the images of Greeks lined up at ATM machines. This is happening because the banks are closed, since the government does not want people taking out all their money. If this were to happen, the banks, being the foundation of economy, would collapse.

That is why the ECB (European Central Bank), as a way to save Greece, pours some money through emergency liquidity assistance (ELA). Pretty much, cold, hard, cash is flying into banks each day to resist emptying out their pockets. However, people will continue to take out their money, as they are afraid of losing it if the country “Grexits” because then, as we just figured out, their currency would be worthless.

Then, the government announced a referendum on July 5th on whether or not the country would accept the austerity measures pushed upon them by the E.U. So what’s the point of this?

Picture: Thanassis Stavrakis / AP Photo

Even though the referendum would not officially give the Greeks the power to change the consequences put upon them, it does send a message. The referendum, resulting in a clear “OXI” (“NO” in Greek), showed that Greeks were sick and tired of the measures that were impeding their country. It also demonstrated that Greece was ready for more talks – and this time, ready to perhaps listen and accept budget reforms and take on sustainable measures.

But this is also an example for all of us here. This is not just affecting the Eurozone. World economics works like an ecosystem. Here, in our city of Toronto, picture the Danforth. Greek restaurants and stores are being heavily affected by this crisis, as their shipments are being held overseas, sadly resulting in empty businesses. Individuals here are worried for families there, as living conditions turn sour.

Picture: Orestis Panagiotou / EPA

The Greek debt crisis is a way to challenge our thoughts on social responsibility. Taking these images into account, we see that this goes beyond fiscal responsibility. Just as the European Union makes it harder for Greece to take a breath, and as Greece makes it harder for the European Union to trust them, the people themselves are showing us the morbid reality, outside this bubble happening in the heart of Brussels. As we see images of Greece’s dire future, a wounded Aphrodite, a broken E.U. sign, cheeky (or genuine) remarks to Angela Merkel, and a litany on the death of the euro, we understand that though the fate of their country no longer lies in their hands, the people will not let the world forget that they do, in fact, belong right where they are.


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