Yesterday’s “no” vote means that Greece’s debt crisis will continue. Here’s what the Greek economic crisis is all about and why it’s spiritually important.
The Greek economic crisis explained
Confused by the Greek economic crisis? Greece’s financial situation is complex and it involves problems that have been piling up for several years.
How did the Greek economic crisis begin?
Greece has struggled economically for more than five years. In 2009, Greece’s heavy debt load and large budget deficits led to a series of austerity packages that cut government pensions, reduced salaries for public sector workers and created other hardships for Greek citizens.
One of the ways the International Monetary Fund (IMF) promotes global economic stability is by lending money to countries that are experiencing specific types of financial challenges. Greece falls into that category and received its first bailout from the IMF in 2010.
Last week, Greece defaulted on a $1.7 billion payment to the IMF, triggering the country’s latest financial crisis.
Who is “the Troika?”
Since Greece is considered to be a bad credit risk, only the IMF and a few partner organizations will lend money to them. The IMF, the European Union and the European Central Bank (a group they call “the Troika”) recently offered the country another bailout. But the offer came with conditions.
To accept the bailout, Greece would be required to impose additional austerity measures in the form of more tax increases and even deeper spending cuts — a situation that many Greeks believe to be unrealistic and untenable.
What were the Greeks voting on?
The Greek referendum was a vote about whether or not to accept the Troika’s bailout offer.
A “yes” vote meant that Greece would accept the bailout and implement another round of austerity measures; a “no” vote meant that the country would probably go off the euro currency and work on finding its own solution to the Greek economic crisis.
The vote was no.
How are the everyday lives of people in Greece being affected?
Greece no longer has access to emergency funding from the IMF. So, to conserve capital and prevent depositors from taking money out of the country, Greece closed down its banking system for six days last week.
Imagine only being allowed to withdraw $66 from your account each day, with no real certainty about when you would be able to access the rest of your money.
That’s what the Greek people are dealing with right now. It’s basically a cash economy in which people have little or no access to cash.
The tourism industry (a major source of income in Greece) has dried up and in some cases, supplies are running low because suppliers don’t know when or if they will be paid.
Consequences of the Greek economic crisis
If the Greek economic crisis isn’t resolved soon, the situation could easily devolve into a full-blown emergency. And that’s not the worst of it.
Now that Greece has rejected the bailout, it’s uncertain how the country will overcome its financial deficit. None of the options are ideal and the country may still have to impose spending cuts and other measures.
Here are a few things you need to know about Greece:
- The austerity measures that were implemented since 2010 have resulted in a high unemployment rate of 25%. (For comparison, the unemployment rate in the U.K. just dropped to 5.4% — its lowest point since 2008.)
- The current youth unemployment rate is 50%. Young people can’t find jobs and have no way to earn a living during what should be the most productive years of their lives.
- Unemployment, Gross Domestic Product (GDP) and national debt are connected. Greece’s high unemployment rate reduces its GDP, and reduced GDP increases the national debt, creating a vicious cycle that is difficult to escape.
It’s also important to know that EU politics are involved in the Greek economic crisis. Instead of doing the right thing for the country and its people, various individuals and entities appear to be using the crisis to achieve their own political goals.
The spiritual side of the Greek economic crisis
This isn’t the first time that a nation has endured a sudden and overwhelming debt crisis. For example, in 2001 Argentina found itself in a similar situation, resulting in significant economic and social challenges.
Based on the experiences of Argentina and other countries, these types of crises have the most devastating impact on those least likely to afford it — the poor and the vulnerable.
Having lived through the Argentinian crisis, Pope Francis knows what’s at stake for Greece and its citizens. In an effort to draw attention to the spiritual side of the Greek economic crisis, the Vatican released a statement over the weekend:
The news from Greece regarding the economic and social situation of the country is worrying. The Holy Father wishes to convey his closeness to all the Greek people, with a special thought for the many families gravely beset by such a complex and keenly felt human and social crisis.
The dignity of the human person must remain at the centre of any political and technical debate, as well as in the taking of responsible decisions.
Pope Francis invites all the faithful to unite in prayer for the good of the beloved Greek people.
The value of the individual is usually lost in the circus of international politics. Too often, those in power pursue remedies that are either self-seeking or politically convenient.
Yet, in God’s economy, the needs of the individual — especially the needs of the poor and the marginalized — take priority over the desires of institutions. The concerns of the poor are certainly more important than politics.
We have a spiritual responsibility to pray for Greece and stand in solidarity with the Greek people during this crisis.
But the Greek economic crisis is also a reminder that regardless of the color of our passport, it’s critical for us to speak out whenever institutions or politicians place their interests above the needs of the poor and vulnerable in our midst.