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India’s World – Greece on collision course with EU

Summary:

The voters in Greece have handed over the power to a communist leader who leads Syriza party. The new leader has assumed power when Greece is deeply in Debt and in a debt repayment crisis. The Greek bailout expires on February 28th. By that date the political leadership in Greece and European Union have to decide whether to continue the bailout and if so whether Greece would continue to agree to the spending limits imposed by lenders. The New Greek government is committed to anti austerity measures and greater public spending. However that would amount to breaking the contract with the lenders.

Under the Macro Adjustment Programme, Greece had to compulsorily implement the following programs:

  • Fiscal reforms to generate savings, that is, austerity.
  • Structural reforms to enhance competitiveness and growth, such as privatisation of public assets and deregulation of markets including the labour market, that is, labour market flexibility.
  • Financial reforms to enhance financial stability, such as banking regulations, and bank recapitalisation and resolution mechanisms.

The feeling of nationalist pride has resulted in such a change. Experts say that Greek’s policies are now decided in Brussels and not in Athens. It is also being said that this crisis began in 1994 when the EU 15 decided to go further and expand to EU 27. Political unification without economic similarity is a big problem and the EU countries then forgot this. The problem now has been aggravated in Greece because of the 2008 recession. Few other European countries may face similar problems in the near future.

There is also a concern that the public popular measures announced by the new government would push the country into a deeper economic crisis. And this crisis would affect all the European Union member countries. Greek Debt is not a private debt but it is a government debt. If this muddle continues the Greek economy would collapse.

Since its inception, the new government has been asking for debt write-off. But the Eurozone countries are not supporting the country. Greek at this point of time is virtually isolated. If Greece exits Eurozone and European Union it will have major political and economic implications on Europe.