keepquestioning

The bail-out

In News on June 5, 2011 at 6:51 pm

In May 2010, the Greek government, under the premiership of the Socialist leader George Papandreou requested financial support of €110 billion from the International Monetary Fund (IMF) and Greece’s euro area partners, amid fears of default and of borrowing from the international markets at forbiddingly high rates. Greece’s debt has been steadily increasing over the past few years, reaching 115% of the GDP in May 2010, when according to the European Union’s Growth and Stability Pact rules, the debt/output ratio had to remain below 60%.

The measures which have been proposed as part of the IMF-EU financing plan include fiscal austerity, deregulation, privatization, reducing public sector wages. These measures are a de facto devaluation for the country, without the actual devaluation, as Greece is part of the eurozone and does not have an independent monetary policy. The announcement of the measures has been so far followed by public disaffection in the Greek society. One may argue that in the long-run (long, long long-run) the consequences of the structural changes to be adopted may actually do the state-fed Greek economy some good, but there is no doubt these measures are and will be even more painful to the Greek citizens.

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