In the New York Times article “Greece” (November 27, 2012) the writer states that:
Over the last decade, Greece went on a debt binge that came crashing to an end in late 2009, provoking an economic crisis that has decimated the country’s economy, brought down its government, unleashed increasing social unrest and threatened the future of the euro.
The Greek financial crisis began in 2009 when it was announced by the new government in Greece that the past government had falsified budget figures so that a massive debt was covered up “in the wake of global economic meltdown.” Greece had taken advantage of a strong Euro and low interest rates so that the government and consumers could drive up borrowing, building up a massive “ $400 billion dollar” debt, most of which had been lent to Greece by France and Germany. Once the true size of Greece’s deficit was revealed, Greece relied on a massive bailout package of “$152.6 billion dollars” from Greece’s richer European neighbours. The cost of this bailout was “a series of austerity measures meant to cut the country’s . . . deficit and restore investor confidence. Greece cut the pay of its public workers — a quarter of the work force — by 10 percent — but continued to miss deficit targets.”
In 2010 and 2011
Investors continued to demand ever higher interest rates for Greek borrowing as the market appeared to conclude that some sort of default was inevitable. Mass demonstrations turned violent in October 2011 as Parliament barely passed additional austerity measures Europe demanded to keep the bailout money flowing.
European leaders “won the right” to decrease Greece’s debt by more than “50 percent” and a new leader “Lucas Papademos” formed a government in Greece that “pledged” to agree to the terms of a second bailout package. Concerned about becoming the answer to all of Europe’s debt problems Germany thought that Greece should pay a penalty for its economic failings. The leaders of France and Germany threatened to withhold the second bailout package should proper austerity measures not be taken, resulting in political turmoil in Greece.
Finally, a deal was reached by Mr. Papademos and other political parties to accept the new austerity measures – minimum wage was cut by as much as “22 percent” and there were “150 000 public sector” layoffs. The new bailout of $172 billion dollars was paid in special “’escrow’” so that debts were paid before money was paid out to “government coiffeurs.”
But by elections in May 2012, talks of moving away from the Euro to the “drachmageddon” currency became prevalent as more and more austerity measures needed to be taken, more people protested, and more businesses in Greece collapsed.
So far, there appears to be little reason for optimism, with the unemployment rate in May 2012 reaching a record 23.1 percent, up from 22.6 percent in April. The jobless rate among youth has reached almost 55 percent.
So how do Greece’s current problems affect Canadian? A current article by Andy Radia “How Greece’s problems affect Canada” (May 14, 2012) lays this out. Finance Minister Jim Flaherty stated on CTV’s Question Period that damage to Canada would be minimal. Canada is doing what we can by paying down our debt and balancing the budget. Despite Flaherty’s remarks Radia feels Europe’s problems could still affect Canadians.
Firstly it could affect “global growth prospects, hitting resources and financial shares hard.” It could also hurt the Canadian dollar. As well, many Canadians with property in Greece are faced with the tough decision to sell or keep their homes because of “devaluation” of their homes and new property taxes. Trade with Canada and Europe could also become more difficult but the Harper government is looking to sell Canadian goods elsewhere such as China and South America to limit this effect from Europe. Additionally, if you are a Canadian travelling to Greece it will become cheaper because Greece “need(s) our money more than ever.” So for Canadians, it would seem the affects of Greece’s financial crisis are not so bad, we might even be able to take a cheap vacation to a beautiful and historical country. But for Greece it would seem, they are stuck in a financial crisis that will not end any time soon and probably not for the best.