No Green for Greece

Many people have heard about the Greek debt crisis and its causes, but there has not been any consensus on what should be done about it. Many politicians and economists have been debating over what we should do about it, or even if we should do anything about it at all. These debates may seem far off and irrelevant but they are important. We need to take this issue seriously because the current economic situation in Greece was caused by the same factors that are plaguing our government.

 

The Greek financial crisis was caused by excessive government spending and their failure to properly deal with their debt. The Greek government has been borrowing money to pay for budget shortfalls caused by high public sector spending. In any other state high amounts of debt would cause high interest rates on their debt and so depreciate the value of their currency, but Greece got away with it because it was part of the European Union.

 

Fortunately for Greece, the euro was backed by other European countries, and so the weakness of the Greek economy was balanced out by the strength of the economies of the other countries such as Germany and France. The Greeks could have possibly continued their high amounts of spending were it not for the economic recession of 2008 that brought irreparable damage to the Greek economy and brought fears of a greater European financial crisis. Greece soon found itself unable to pay its debt and it asked the European Union for help.

 

After much debate the leaders of the major European powers and the European Parliament decided that they needed to act. The European Union and the IMF (International Monetary Fund) decided to bail out Greece in 2010 with 110 billion euros. However this was not enough and they had to bail out Greece again with another 130 billion euros and Greece is still in financial trouble.

 

Even with the money from the European Union, Greece is still in trouble. The bailouts came with strings attached that the Greek government and the Greek people did not want to comply with. The Greek people have been used to large state-funded programs, but the restrictions brought on to the government by the austerity measures brought on by the bailouts have dramatically cut state spending to social programs. This caused riots throughout Greece as the people protested the loss of government benefits. Many in Greece are calling for the country to leave the European Union to avoid austerity measures. While this would free them from the restrictions of the European Union it would also mean that they would lose their protected currency and it would be liable to rapid inflation. Unless Greece can get its financial house in order this would not be a wise option, but many other Europeans want the Greeks to leave the European Union as well. The future will be tough for Greece no matter they do or what other countries do.

 

It is easy for people to say that we can solve other people’s problems, but experience has shown us repeatedly that this is not always possible. Sometimes, our attempts to solve another group’s problem will create problems that we will have to deal with. The European Union’s intervention in Greece caused violent riots and crippling strikes in Greece, and now many are looking to America for help with the crisis. There is no guarantee that our intervention will make the crisis better, but there is the possibility it could make things worse.

 

The United States should not bail out the Greek economy because we cannot afford to do so. We already have our own fiscal crisis that we will have to deal with. Our government has $14 trillion of debt and it is increasing at an alarming level. If our public debt continues to increase, then we may find ourselves in a situation where we will have to pay higher interest rates on our debt. Someday we may not be able to afford to pay off our creditors and will have to risk defaulting on our debt. That will bring chaos to the global economy that will dwarf the damage caused by the recession in 2008. This crisis might not happen if we solve our spending problems now but it will not be easy.

 

Fortunately, we have time. Greece’s time ran out and now they are at the mercy of their creditors, but that does not mean that other countries will end up the same way. If other countries can learn from the dangers of high amounts of debt then a future debt crisis can be averted.

 

Unless the Greek government fixes their spending problem, any financial aid to Greece will only prolong the financial crisis by giving their government the means to avoid painful reform, but this is a process that must happen. Everyone has to learn to live within their means or risk suffering the consequences.

 

The crisis in Greece has shown us that some countries can’t solve another country’s problems with a quick fix solution. The people in the country have to be willing to make sacrifices and take the initiative in solving their own problems. Otherwise, outside forces may force them to act or may force their own solution on the people.

 

Braden Buckel is a first-year literary journalism major. He can be reached at bbuckel@uci.edu.