Austerity, the necessary evil?
The Greek crisis or I should say, the 'Eurozone Crisis” has come to a new level now. With the leaders secretly pointing Greece the way out the European Union is showing its fear to the world. And their fear is very genuine. If we go back to the start when all of it had just started there was a point when Greece was threatening the EU by saying that if they don't give it a bailout, then they'll approach the IMF. At that time it worked, all the leaders sat down just because of that one statement and if Athens would have gone to the IMF for a bailout it would have seriously affected the Euro. That is the crux of everything. None of the countries are doing it to save Greece or will do to save Italy or Spain in future. It's all about the Euro.
Right now Greek are not able to form a majority at their center because of all of these problems. Greece, which initially thought that EU would help them by bailing them out is now facing a great deal of problems with the EU and the biggest problem out of everything else is 'Austerity'. The word of the year 2010 is now haunting the Greek with its implications on the future of Greece. Athens has passed two 'Austerity' bills and this can be quite detrimental for the economy. Where on one side Prime Minister David Cameron and Dr. Angela Merkel are supporting this decisions and calling it the best way for Greece, there are experts who say that it might do more damage than good to the Greek.
Right after the bill was passed there were massive strikes, burning down of more than 45 buildings, riots and clashes between the police and the people. If this remains the scenario then something like austerity is going to tear Greece apart. What actually happens in case of austerity is that the government spending is cut, starting from pension benefits, certain allowances etc. and the taxes are increased say, at the airport or in the market. By this the government tries to raise a certain amount of money which is eventually be used to wipe out its debts. Now this seems all nice in one front where the Greek are expected to work harder and work their way upto a point when everything will be stable but the basic point of contention is that how? How can a country with such measures sustain in the market later? If taxes are increased and even if eventually the austerity policies look promising (I doubt), the basic problem that might arise will be the the FDI pull out which might worsen the situation.
If a country is not allowed to give benefits to its people, if its not allowed to give what it has been giving to its people for years now and is now forced to put on a mask where it will extract more money out of people, the people are ought to be mad at it. Now the government formation in Greece is anyway very difficult because the Greeks don't know what to handle, Economics or Politics? Although both are very well interconnected but each has a thousand sides to it.
Some have suggested that Greece should go its own way with a separate currency and kick austerity. This seems the most unlikely that Greece by choice would do something like this. It has reaped all of the trust that the investors still have in its markets only due to the fact that it is a part of the European Union. If it weren't, it would have fallen long back and right now might as well have been rebuilding. Its association with the so called great 'European Union' has been the only reason for its current status(which is better off than if it weren't a part of EU).
For what is to happen to Greece is something which is going to teach the world a big lesson and if Spain and Italy continue with their downfall the same way the so called European Union would be doomed because this crisis which is occurring well, connects each of the European economies because Italy, Spain and Greece are indebted to Germany, France and Briton. Now why would any country give a debt to another one? The reason is just one, to expect a better return and on those calculations their economies would have certain other investments planned. Now the scenario is as such where that money seems distant and lost and due to that the development plans in the creditor countries get affected. So, Germany has no other option but to ask Greece to follow austerity and not repeat this mistake ever because if a bailout is given, it will be the money of the German taxpayers which goes into filling the needs of the Greek, which seems highly unfair to the Germans.
With Hollande meeting up with Merkel soon to finalise the relief package for Greece and the web being filled with the so called 'similarities' between 'Mr. Normal' and Merkel page results, it all depends on both of them to decide the future of the EU. Hollande who in his campaign has openly talked about the fact that he would not let Germany be the only deciding power for the future of Europe is going to need to come up with some new tactics to deal with Merkel as she has been rejecting most of Sarkozy's plans and eventually had turned softer to 'Mr. Bling Bling' when 'Merkozy' agreed on certain conditions. During his grand visit to Berlin, where he will dine on the eighth floor of the Chancellery and would need a miracle to turn things around and come out as the new champion for the French. Maybe after all of this, the page results with 'similarities' might be a good ground to start talks with her.
So is the great European Union's time up? Is it the end of the Euro that we see in the near future? Is austerity the 'necessary evil'? Or is it the beginning of the end? Stay tuned.
Photo: The Greek Parliament.