EC, ECB and IMF have agreed to bail out Greece second time in two years now. Offering it a package of $170 billion to allow it to repay some of its debt and keep its banks afloat with some capital in them. But, this bail out has come at a cost – humiliation and promise of severe austerity measures by Greece.
Last week Greek parliament passed a resolution to impose austerity measures as demanded by eurozone countries. This includes further cut in government spending, cut in salaries and pensions and more pink slips.
Germany demanded more of such austerity from Greece – forgetting that humiliation of Greece is a repetition of what it had once experienced after first world war in the form of treaty of Versailles. Though that was related to war, nonetheless, the humiliation it is causing to Greece is undesirable, and in the long term it breeds contempt in the minds of Greeks.
Greece has been asked to bring down its debt to GDP ratio to 120.5% by 2020 from the present figure of around 160%. This means, Greece has to endure economic recession for another decade before it limps back to normalcy.
Many accuse Greek politicians for the mess Greece is in. But, ultimately it is people on the street who are paying for the imprudent and ostentatious policies adopted and implemented by Greek politicians few years ago.
For the fifth year Greece is experiencing economic recession. Private lenders, i.e. Greek debt holders have been asked by eurozone and ECB to forego their profits to the margin of more than 50%. It makes difficult for Greece to borrow money in the future from private lenders.
Keynesians such as Paul Krugman argue that cuts in spending will only worsen the matters for the economy. Some argue that austerity measures are necessary to improve debt to GDP ratio which will help economy rebound in the long term.
More than economics, it is livelihood of common Greeks that is the matter of concern. What this crisis has brought to the fore is that bad policies by bad politicians can cripple a whole nation.
Greece should not be humiliated for its past sins. It has learnt its lessons, and it should be rescued with dignity it deserves as the cradle of western civilization.