In April last year, the Greek government sought financial help from the Europe Union (will be shortened as EU further in this post). EU country members and the IMF agreed to lend a hand and has set EUR 110 billion available for the next three years. This loan would be issued per year.
How did it start?
The greek deficit is EUR 32 billion. Before de crisis Grecian GNP was EUR 237 billion, its yearly tax revenue was EUR 87 billion and the Greeks spent EUR 120 billion every year. With that immense financial shortage, there was no other way than to ask for help in order to get out of the red figures in their books. One of the conditions of the EU loan is that the Greek government had to agree to cut public expenses.
These strict measurements mean that Greece has to pay 5% interest over the total amount of the loan. Practically, when the public debts will rise till EUR 300 billion, they have to pay EUR 15 billion interest every year! Mind you, I repeat EUR 15 billion is only the interest on yearly basis. In comparison to this, Dutch government had started to cut the expenses of EUR 18 billion within 5 years, starting from last year till 2015. So you can imagine how tough it is for Greece.
Last week-end some of EU financial ministers gathered together in Luxemburg to ‘informally’ discuss about the Grecian second SOS (detail, Dutch financial minister was not invited). Greece has asked for a second loan last April. In that same week-end, German opinion magazine, Der Spiegel issued news that Greece might want to get out of the Euro zone. In my humble opinion, this would not be a good decision. You don’t have to be a professor of economy to conclude this. There have been jokes also about Greece selling one of its islands to cope with the debts. These are inconsiderable and insulting jokes since the Greeks are very proud of their country and cultural heritage.
I hope there would be a good, moderate agreement to settle this. And for the Grecians themselves, they need to improve their ability to pay the tax on time and stop spending money they don’t have.