A Greek tragedy?

Bailouts, unrest and the future of the eurozone

Dave loves Nick and Nick loves Dave. But while attention has focused on which form of government will manage the deficit, developments abroad will arguably do more to shape the UK’s fortunes in the short term than who sits where in the ‘historic’ coalition. Whilst the recent agreement to reluctantly put together a 750bn-euro package of funds by European governments and the International Monetary Fund (IMF) has calmed fears of imminent financial collapse in the eurozone, many believe that this bailout had simply off-set the problem. Greece - often dubbed the ‘weakest link in the eurozone’ - is facing violent civil unrest, a public deficit of 13.6% and debts of €300bn, all predicted to increase significantly. And a collapse in Greece could potentially be the ‘first domino’ that will bring the other PIIGS (Portugal, Ireland, Italy and Spain), and potentially the whole of the EU, crashing down.

In order to meet debt repayments, Greek leaders are forcing citizens to swallow the ‘bitter pill’ of extreme austerity measures - including major cuts in public sector welfare and services and sharp cuts to wages and pensions – alongside implementing reforms to modernise the economy and improve productivity. The Greek people, it seems, don’t want to take the cuts in living standards lying down and the announcement of a general strike next Wednesday is the latest in the series of protests that are hitting the economy hard and making investors nervous.

Who is to blame for the crisis? What needs to be done to deal with the root causes of the financial crisis in Europe? Should the Greek people recognise that they are ‘all in it together’, accept austerity measures in the name of the National Interest and long-term stability of their economy? Have they been enjoying the EU ‘gravy train’ for too long and now need to stop smashing their plates in protest, instead facing up to some harsh realities? Or, indeed, would it be better if Greece defaulted on loan repayments, declared bankruptcy and withdrew from the eurozone completely? Are these problems peculiar to Greece and the ‘Club Med’ or could the UK catch the ‘Greek disease’? If so, what would need to be done to prevent it? Is another global economic crisis on the cards?