The recent election in Greece is a verdict against the austerity which ruined the country. Critically analyse in the light of recent developments in Greece and its impact on EU. (200 Words)
The 2008 global economic crisis worst hit Greece causing wide spread unemployment. Greece being a welfare state continued its spending causing its budgetary deficit to soar to about four times euro-zone’s prescribed limit. To save Greece economy from an imminent collapse IMF & EU offered two massive bailout packages; one in 2010 worth 110 billion euros and other in 2012 worth 130 billion euros.
The pre-condition for bailout packages were that Greece would significantly cut down the budgetary deficit by accepting an austerity measures requiring huge cuts in salaries and other social welfare schemes as well as much higher tax rates.
Recently an unusual Anti-austerity coalition between Syriza (radical leftist) and independent Greeks (right wing) came to power. The new government aims to:
- Re-negotiate the terms of international bailout package.
- Secure a write off for Greek’s debt by half.
- Give respite to citizen from austerity.
The new govt. in Greece plans to do away with austerity measures. But any failure on the part of Greece to meet its austerity and debt commitments, will put its place in Euro-zone at risk.
Impact on EU:
- Anti-austerity movement led by left-wing parties in different countries of euro-zone will be strengthened.
- ECB’s massive QE programme to revive EU economy may be given a second thought.
- Overall weakening of EU.
- Greece may exit EU.
Greece govt. should enter into a dialogue with institutions like EU & IMF and evaluate all pros and cons before taking any drastic step.