Throngs of people began lining up early outside Greek banks again Monday morning, July 20th, as the
Greek financial crisis continues to grip Europe. For the first time in three weeks, banks are serving customers, but questions abound about how long they will stay open. As Greece begins paying back the European Central Bank (ECB) and International Monetary Fund (IMF) for outstanding loans with a seven billion dollar bridging loan from an EU emergency fund, experts wonder how long Greece can continue to prop-up their economy.
This comes after a tumultuous six weeks for Greece and its 11 million residents. After voting against new proposed austerity measures in a national referendum, Greek politicians went against the overwhelming vote and ushered in the tighter austerity measures, effectively agreeing to the terms in order to get the bailout money to pay the IMF and ECB. Greece’s inability to come to a consensus in crisis wasn’t lost on the rest of the EU. “The idea of a “Grexit” was for the first time suggested collectively by the Eurogroup of finance ministers,”
the UK-based Telegraph reported. This would essentially force Greece out of the now problem-plagued European Union.
Greece has had something of a rocky relationship with the EU ever since the country’s entrance into the union in 2000. However, the relations reached fever pitch and have been escalating negatively since 2010 when, “Greek borrowing reached an all time high and the first in a series of bailout programs was unveiled,”
CBC’s timeline on the Greek crisis states.
Canadian lawyer
Tony Merchant, founder of
Merchant Law Group, has
traveled to Greece several times during the Grexit Crisis. He offers this insight into the long-standing financial debacle: “It has a lot to do with fiscal responsibility. For example, in 2009, the municipal Athenian Government utilized Google’s new search capabilities to count the number of privately owned swimming pools. In excess of 1,000 pools were counted, so the mayor found it strange that only three people had checked the box on their tax form requiring them to pay 20 Euros extra for a pool.”
As Tony Merchant also notes, Greece is but one of the EU’s financial problems, as Ireland, Spain, Italy and Portugal also pose a threat to the already financially-unstable union. “Greece has received the equivalent of a roughly 20 percent cut in the principal. This is hardly a cure for a country with a 150 percent debt-to-GDP ratio. Ireland and Portugal were given a matching interest rate cut on their bailout loans, but voters there may wonder why they are bearing the full brunt when Greeks are not.”
Germany, however, has a vested interest in keeping Greece in the EU and it centres largely around economic gains. Germany’s GDP soared in 2013 with 46 percent coming from exports because the low-euro makes importing German goods profitable for both the importing country and Germany. “Hiding in the Euro now hovering near parity with the US dollar allows a strong Germany with ten year bonds at 0.1%, money for nothing, and has allowed the balance of payments winnings by Germany year after year,” Tony Merchant writes. “Germany is helping Greece. But it is not tough love so much as self interest.”
Despite the Greek economy being responsible for a meagre two percent of the Euro zone, a Grexit would have widespread effects across the union and leave the Greek people with a dramatically impacted living standard and uncertain future.
"A Nobel prize winning economist I read in Greece last week, predicts Grexit would cause the sharpest decline in standard of living of any economy since the start of the Second World War,” Tony Merchant said, "and there seems to be acceptance of that reality."
"Licenses to own one of the 13,000 taxi cabs in Athens, and yes they do have Uber, cost €200,000 in 2008 and sell for €65,000 today. Cab earnings in the past seven years have declined from averaging €250 a day to the €100 daily range. But no one seems to be working harder. Almost all the businesses in Athens close on Mondays - as usual, tourist season or not. I was told at a barber shop at 4:45 pm that they close at 5:00 and could not take me. A 23% Goods and Services Tax just went into effect but there are no signs of people working harder or being desperate or even concerned about how to make an extra Euro," said Tony Merchant.
"Demonstrations of a month ago, of a year ago, of two years ago, the summers when Syntagma Square, opposite the parliament buildings, occupied by demonstrators in tents shouting the night away, are all over. The calm of late July going into August is like a people who have lost a war. The fight seems out of the Greeks. Greece is in the Eurozone to stay. The people seem ticked but not crushed and they accept."