Dutch Affairs / English / Thoughts

SOS from Greece

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.

Greece Flag

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.

High interest
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.

Second SOS
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.

Sources:
Financieel Dagblad
NRC Handelsblad

2 thoughts on “SOS from Greece

  1. Wow, a concise but very informative analysis to me.

    I might add that ( in my opinion)the economists and politicians act like one-trick (neo-liberal) ponies ; they present huge and austere cuts in public spending which primarily hit the poor and may well cause even worse economical prospects, as THE solution.

    (Countries like Argentina and Iceland has been sensible enough to get rid of IMF).

    • Thank you. I am glad you find it concise.
      I have been triggered by a remark of an economy expert who was a guest at Pauw and Witteman talk show last Monday. This man explained how the consequences would be for Greece and for Europe. Those he described concerned me.

      The poor seems to get poorer and poorer while the riches remain untouched on the surface but what about the middle class like me? I believe the middle class carries this burden more than others. Furthermore, The Netherlands as a tiny country seems to willingly carry the burden of other EU countries in need.

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