Images of unemployed Greek youths throwing metal barricades through plate-glass windows; photos of Irish citizens lining up to withdraw their life savings from banks in Dublin; the fall of a government in Portugal; massive rallies of unemployed youth in Madrid… The Euro PIIGS are on the run. There is a human reality behind the dry numbers of Europe’s debt crisis.
The warning signs of the Eurozone crisis started when yields on Greek bonds began to rise (i.e. the price of the bonds began to fall) in the fall of 2009, as the markets began to have doubts about the capacity of the Greek government to repay the country’s mounting public debt. And no wonder — Government debt in Greece stands at 127% of GDP. The new Socialist government elected in October 2009, revised the budget deficit up from the previous government’s estimates of “6 to 8%” to a more realistic 12.7% — later again revised up to 15.4%. The rise in bond yields led to increased borrowing costs for the government, which had to request a bailout from the EU and from the International Monetary Fund.
The government eventually proposed a series of
austerity measures as part of the bailout, which then led to a €110 billion EU/IMF package backed by Germany. After more than a decade of easy government money the party was over, and Greeks — who have much lower labor productivity than the Germans — could no longer afford to live like them. It’s an open secret that
tax avoidance in Greece has been rife and public procurement has involved kickbacks to decision-makers; but the Greek man and woman in the street has also benefited through excessively generous state-funded retirement and unemployment benefits. If Bunga-Bunga is frivolous partying on the public dime, then the Greeks have been at it since their entry into the Euro.
