After having agreed on the new austerity plan, Greek economy is far from being rescued as analysts and EU members have declared.
The new bailout cuts, worth £110bn, represents in fact a new starting point for Greece as the country tries to follow Troika's guidelines and attempts to rescue its economy from insolvency. The austerity measures are in this sense a precondition imposed by the European Union in order to release the funds.
What is Greece expected to do?
Greece now has two days to solve two vital points addressed by the EU and the IMF, which are:
- to explain how it will manage to rescue €325m of the €3.3bn in budget saving
- to provide an official written confirmation that the austerity measures will be applied regardless of the result of the next general elections, which are due in April 2012.
However, many members of the current coalition seem reluctant to agree to the tough measures imposed by the EU, aiming at reviewing them in order to soften some parameters and allow economic growth, yet it seems impossible that this can happen under the current circumstances. Amongst those opposing to the austerity plan is Antonis Samaras, the leader of the conservative New Democracy party, who is most likely to win next general elections, even though they are without a strong majority. According to Samaras the guidelines addressed by the EU and the IMF are offensive as they show a lack of respect for the Greek population, which is seeing its minimum wage cut by 20% to about €600 (£500), further pension cuts and 15,000 less public sector jobs which will lead to an overall cut of approximately 150,000 public sector jobs.
General elections, due in April, will follow a key date for the future of the Hellenic peninsula as by March 20th it has to meet debt repayments which amount to €14.5bn (£12bn). If this does not happen, Greece will have no other solution but to admit the default and leave the EU. The main issue that remains now is: how to convince Greek people that bailout cuts and suffocating measures imposed by technicians (who have not even been elected but ‘imposed’ by the EU) are better than the default? At this point it would be beneficial to study an example from the not-so-remote past: Argentina .
In the meantime markets in Europe seem to have responded positively to the announced bailout cuts on Monday, with the Euro to Dollar exchange rate hitting a two month high at $1,324.