Sometimes there are news topics that are inescapable because they are important. The case of the current Greek crisis, more specifically the phase of entering bankruptcy or credit extensions is important. I am not going to specify who did what and why A is responsible for X and B is responsible for Y. There are fundamental questions to be asked about Greece in context of this crisis. We live in 2015. We might have to relearn some lessons about economic and financial crises.
Quick facts overview:
- Greece is located at the eastern border of the EU-region.
- Greece also borders on the Mediterranean.
- The Greek economy has little industry.
- The Greece economy relies on some exports and tourism.
Now you might think that these facts mean very little. In the context of Greece they mean a lot. Currently the EU-region borders are under pressure from immigrants who want a better life. One entry country (next to Spain and Italy) is the very accessible Greece. Managing immigration affairs is costly.
Industry, more specifically heavy industry makes a country’s economy less reliant on industry imports. In economics this comes back to the trade and the balance of payments. More imports than exports results in more import expenses than export revenues. Add to that, that industry can mobilise the workforce and increase tax revenues, public consumption/spending, GDP and economic growth.
The Greek economy has some exports and furthermore heavily relies on tourism. It is a beautiful country. Thing is tourism depends on seasons of good weather and combined safety and stability. Without a good Spring to Summer season many middle and lower-income Greeks miss out on much-needed revenues.
Combine all this with the EU saying “we want to help but we also want our money back” and the Greek government saying “sorry people, too many loans and too little tax revenues.” I am not pro or anti-EU and I have nothing against Greece. The EU should be more transparent in its actions and the Greek citizens should not have to suffer because their government did not balance the annual budgets. Apparently there have been cases of corruption too that add to the existing problems.
What is happening to Greece can happen to every “weaker” economic country in the EU (or world for that matter). When governments do not balance their country’s budgets at the cost of their citizens the citizens have every right to be angry. I would be and I am concerned with the Netherlands, my own country. The Netherlands have a huge amount of private debt in real estate and it affects many people.
There are two outcomes for Greece that are probable. Either Greece leaves the EU and loses the Euro or Greece stays in and keeps the Euro and EU-relations. In the first case scenario the Greek state and its economy have to start over, from zero and rebuild themselves. Rebuilding your country’s economy and its national confidence is hard. The low and middle-income earners will suffer directly and the Government has to regain the people’s trust.
When Greece stays in the EU the crisis continues to linger with immigrants and creditors at the borders while the Greek people try to live their lives, if possible. The existing national budget has to be reviewed and balanced for the creditors and the Greek people. When both lose trust in the Greek government the country can economically implode.
When you ask me “what would you do?” my answer is simple. It would be “I have to take care of my people and pay back what can be paid back” but I am not a government. Governments have to make many difficult decisions on a daily basis regarding their citizens, neighbours and other parties. The Greek government and the EU have their own interests to consider.
In the end the Greek government and the EU have their EU-citizens to consider…