Sunday, November 11, 2012

Editorial from the New York Times on Greece

The NYT published the other day an editorial on the current situation Greece which I found very interesting, sad, true and useful for my IB year 2 IB economics sections.

Quoting (almost all) the article:

Greece’s Parliament did what it had to do on Thursday. Despite some defections from the ruling centrist coalition, lawmakers narrowly approved a $23 billion package of new austerity measures, including further spending cuts to social services, pensions and public salaries, as well as tax increases demanded by Greece’s European lenders. In return, the troika of official creditors — the European Commission, the European Central Bank and the International Monetary Fund — promise to consider, but not guarantee, reducing the punitive interest rates they charge Greece for bailout loans and unlocking a $40 billion aid payment Athens needs to avoid a default on its debts. No responsible Greek lawmaker could have ignored the terrible consequences of voting no. But no one can dismiss the threat to social stability from these cuts

The fact is, just about everything in this austerity package has been tried before and failed disastrously. These unpalatable steps will do nothing to make Greece’s debts more payable, bring its budgets closer to balance or help make the structural reforms Greece needs to revive its economy. Instead they will almost certainly further shrink an economy that has already shrunk by an astounding 25 percent over the past few years, making fiscal improvement nearly impossible. 


Greek lawmakers know this but feel compelled to do as their European creditors ask. And, we suspect, many of those creditors also know that more austerity is not the answer. But so far, they have been unwilling to challenge the leader of Europe’s biggest economy, Chancellor Angela Merkel of Germany, who continues to believe that only economic punishment will push Greeks to reform.

It may be a winning political formula in Germany, where Ms. Merkel stands for re-election next year. But it is a profound, and profoundly unnecessary, tragedy for Greece. 


The article can be found here... 

2 comments:

The Liberal said...

So true...
Someone has to put an end to such policies.

The Liberal said...

The Greeks are only the scapegoats. After all, Greece did not cause the current financial crisis, but is instead one of the major victims. Nobody is advocating the degree of fiscal irresponsibility that got Greece into this mess in the first place. But perhaps what would be helpful is that Greece received the same kind of financial support the banking world did in 2008, rather than the barrage of criticism that is terrifying the markets.