“The Greek government-debt crisis is part of the ongoing Eurozone crisis triggered by the arrival of the global economic recession in October 2008, and is believed to have been directly caused by a combination of structural weaknesses of the Greek economy along with a decade long pre-existence of overly high structural deficits and debt-to-GDP levels on public accounts.”
It is one thing to read this very bland description of the 2008 financial crisis’ effect on the Greek economy (courtesy of Wikipedia), but an entirely different experience to see abandoned buildings falling apart in the heart of Athens.
One statistic that is often thrown around in class is that Greece has recently had higher unemployment than America had during the Great Depression. It doesn’t take an economics or international affairs background to see that there is unrest in Greece. It’s literally written on the walls. These high levels of unemployment have led to some of the most beautiful and disturbing pieces of graffiti that I have ever seen. To say that there is an exorbitant amount of graffiti in Athens is like being out at sea and noting that the ocean seems to have a lot of water. You’re literally surrounded by it on all sides.
This lovely piece of graffiti depicts Angela Merkel, the Chancellor of Germany and an avid supporter of austerity measures in the highly indebted southern European countries.
Austerity – Without boring you, austerity is the act of cutting government spending in light of high levels of debt. This sounds great in theory: You’ve been spending too much. It’s time for you to spend less and start paying off some of your debt. However, adopting austerity measures during a recession is like trying to finish paying off your car payments right after your boss cuts your hours. You’re going to be hungry. The people of Greece are ravenous. They cry out for change.
One argument I’ve heard is that Greece has a strong economy that was simply knocked down by the financial crisis and subsequent sovereign debt crisis. Supporters of this argument often point out that Greece had decent levels of growth during the years prior to the 2008 crisis despite high deficit percentages relative to GDP. I find this comparable to a teenage boy driving to school 25 miles per hour faster than the speed limit, who suddenly crashes into another car. The boy has a broken leg and is taken to the hospital. A passerby notes, “Well if he hadn’t crashed, he would have been on time for school.” Just like driving at a high speed will get you to your destination more quickly, high levels of government spending will stimulate growth since government spending is a part of a country’s GDP. However, if the boy had been going the speed limit, he would not be on time for school, just like if Greece had not been running huge deficits it would not have experienced the growth that it did.
What does this mean? In the situation with the boy driving to school, the solution is simple: he needs to leave the house earlier on his way to school so that he has plenty of time to get there. Greece’s problem is not so easily solved. If I could tell you in a few short sentences exactly what Greece needed to do to get out of its problems, they would be so easy that they would have already been solved. Difficult as change may be, it is needed. The people are hungry, and another crash may leave Greece with more than just a broken leg.
Great Post Trevor. I would be interested to see how this fits with what we heard today. I think you anticipated a lot of what we heard. Love the example of the speeding teenager. Very illuminating!