On Thursday, Greece approved the bailout deal that was reached with European leaders over the weekend. This is the first step that could lead to Greece’s banks reopening and some sense of normalcy coming back to Greece’s economy.
With the bailout deal approved, the European Central Bank is giving Greece an extra $900 million euros in Emergency Liquidity Assistance. This will possibly restore limited banking operations and withdrawals from banks would still be limited. The reopening of the banks would allow the flow of cash back into the economy. With the extra $900 million in Emergency Liquidity Assistance, the European Central Bank has provided $130 billion euros to Greece.
The new financial assistance that has been given to Greece so that it’s banks can hopefully reopen is just the beginning of a very tough road for Greece towards economic recovery and stability.
One of the problems that is a road block to Greece’s recovery is the fact that the country has more retirees than workers. There is essentially more people taking from the system than there are people putting into it. This imbalance leads to problems because eventually supply can’t keep up with demand and the economy starts to have problems.
There are ways to fix the problems with Greece’s economy and the agreement that was reached over the weekend takes steps towards correcting those problems and achieving a financially healthy Greece in the future. The Greek people are really dealing with the effects of years of corruption and problems in the public sector. At some point, the effects of both had to be addressed because they are part of the reason that Greece is in the economic mess that it is today. One of the other problems is that Greece’s economy is limited.
Debt relief for Greece might have to be looked at in the future because of the sheer amount of debt that the country has accumulated. The International Monetary Fund has said that Greece may need a 30 year grace period on servicing all of its European debt including the new loans, and the dramatic maturity extension. If Greece needs more bailout beyond the third one that it’s trying to negotiate, the grace periods and extension will more than likely increase.
There is mixed public opinion about the agreement that was reached over the weekend-whether or not it was too harsh. Should Germany have relented to Greece’s demands for debt relief. Angela Merkel had to stand firm on the creditor’s demands for Greece otherwise Germany would end up suffering huge financial losses down the road as could the other countries that have lent Greece money.
Germany led the way in protecting the creditor’s interests while trying to offer ways and hope for Greece to recover and prosper in the future. If Germany did not stand firm in the negotiations, they would have basically sent a message that Greece could have a third bailout without any reforms being instituted, repayment plans put in place, or worry about repaying the loans that they have already gotten, it would have sent a very dangerous message to countries in need of bailouts in the future. The message is that the countries don’t have to worry about repaying the loans.
The steps are harsh and will involve more sacrifice from the Greek people but, in the end, if it leads to a financially stable Greece that don’t have to rely on bailouts and years upon years of austerity isn’t it worth it? A financial stably Greece would be better for the European Union and, one day, be able to contribute to the union’s growth instead of hurt it.