Greek economy close to collapse

by davidcurtisgeorge

The economic proposals of the International Monetary Fund (IMF) and European Central Bank (ECB) are “absurd”, according to Greek Prime Minister Alexis Tsipras.

After five months of negotiations, Tsipras has slammed the EU, ECB and IMF for being uncompromising with their demands.

In an article for Le Monde, the Greek Prime Minister said that the stalemate in negotiations “is due to the insistence of certain institutional actors on submitting absurd proposals and displaying a total indifference to the recent democratic choice of the Greek people.”

The news comes as the Greek economy continues to near collapse, with officials in both Brussels and Athens conceding that, without their help, Greece can only support itself for another couple of weeks.

Alexis Tspiras has been in power for three months now, and the situation looks just as bleak as it did before the election; Greece is €320bn in debt, with the European bailout of €240bn, they still owe €80bn. In light of this, they have attempted to renegotiate the terms of their repayments.

However, the IMF has stood firm, saying that the Greek governments bailout programme is too vague, and thus, the repayments cannot be scheduled.

Alexis Tsipras had promised to renegotiate the austerity measures put into place by Europe.

Speaking on Greek TV, Finance Minister Nikos Voutsis said that “The four instalments for the IMF in June are €1.6bn, this money will not be given and is not there to be given… some parts of out program could be pushed back by six months or maybe by a year, so that there is some balance.”

In order to keep Greece within the Eurozone, the IMF and the ECB negotiated with Prime Minister Alexis Tsipras, leader of the Syriza Party. Advocating anti-austerity measures that would kick-start the Greek economy, Mr Tsipras arranged to pay the IMF in instalments, so that they could pay off their national debt.

However, this revelation that they do not have the financial capacity to pay the next instalment shows that they are struggling more than they may like to admit.

Unemployment in Greece is over 30%, with youth unemployment being twice as high (Eurostat)

On 5th June, the Greek government will pay €304m to the IMF; but many experts are wondering whether Greece will completely default on it’s debt.

There is still talk of Greece switching over to its own autonomous currency, in a move known as a ‘Grexit. Whilst this is still considered to be an unlikely outcome, something needs to change. Officials in both Brussels and Athens have conceded that, without their help, Greece can only support itself until the middle of June.

But how has this economic collapse come about?

The snowball began to roll when Greek inflation rates rose to 4% in 2000, and national debt started to spiral out of control. By joining the EU (and thus entering the Eurozone) Greece was able to stabilise it’s economy, by borrowing money at an easier rate.

However, this money was spent on increasing public sector wages and sustaining the Greek pension scheme (one of the most lavish in the world). This, in combination with an ageing population, tax evasion and hosting a €5.4bn Olympic Games in 2004, left Greece with a national debt which was higher than their GDP.

Alexis Tsipras promised much when he brought the Syriza Party into government; an end to austerity measures, a transition to an independent currency, and tougher attitudes towards Europe.

However, it would seem that his radical ideas need to be taken back to the drawing board, with Greece’s economic fate currently hanging on a knife edge.