Greece Shuts Down EU Austerity Measures

EU Austerity

Greece has a new government, a new leader and now, it seems, a new outlook on its economic future.

Left-wing party Syriza won the Greek national elections on January 25th, two seats shy of a majority government. Now, the new Prime Minister Alexis Tsipras want to tackle the country’s social problem head on by dealing with the nation’s deepening economic crisis. Here is what the new government wants to do and what’s at risk.

Discuss its Debt Repayment

The first item on Tsipras’ agenda, is to address Greece’s €240-billion (equal to $375 billion CAD) debt that was received as bailout money over the last several years.  Tsipras has indicated the terms of repaying that money are grossly unfair and he wants to renegotiate them. The bailout money was provided by EU nations – mainly Germany – and came with strict instructions to implement austerity measures such as cutting services and pensions in the country. According to reports, there’s very little support from EU nations to renegotiate or write off Greece’s debt.

Reversing Austerity

Despite the harsh warning from EU members, Tsipras has moved to reinstate some services that were cut after austerity measures were implemented. This includes halting privatisation schemes, reinstating government pensions and bringing back the €751-monthly minimum wage. The Syriza party came to power on its anti-austerity platform. Making these changes before the first cabinet meeting was expected and what the party promised to deliver. Now the EU, ECB and IMF, who imposed this measure in exchange for emergency aid, have to decide which course of action they will take.

A Murky Future

Even before the Syriza came into power this week, Greece’s membership within the EU was in jeopardy. At the World Economic Forum days before the election, Germany Chancellor Angela Merkel put the writing on the wall. In a speech she warned Greece that it must take responsibility for its debts. She insists she wants Greece in the EU, but stressed the debt must be repaid. The new Greek government has accused Germany of bullying and that the measures have created social unrest. The majority of EU debt is held by Greece, and Germany has provided a disproportionate amount of those funds.

What Does Greece Want?

After his victory, Tsipras addressed the crowd, stating, “Greece is leaving behind catastrophic austerity, it is leaving behind the fear and the autocracy, and it is leaving behind five years of humiliation and pain.” Greece wants the social unrest that has plagued the country since 2008 to come to an end. Record high unemployment has thrown ordinary Greek citizens into poverty and violence and racial tensions in the country are rising. Tsipras says the reversal of austerity is what will get the country back on track.

A Continent-Wide Debt Crisis

Europe plunged into financial crisis in early 2008. The threat of insolvency has also plagued heavily debt-ridden countries such as Portugal, Italy, Ireland, and Spain, all which have been forced to adhere to strict austerity measures in exchange for bailout funds.  So far several EU nations, including Germany, have voiced concerns over Greece’s dramatic and quick move to reverse austerity measures and questioned Greece’s place in the EU membership.

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