The Greek government-debt crisis has definitely been a hot topic in global economy news for some time now, and it looks like European leaders are scrambling once again to come up with solutions for Greece’s struggling economy.
According to CNBC, Greek lawmakers approved another round of steep tax hikes and spending cuts in mid-May, in hopes of making debt repayments due in July and securing more bailout money from European neighbors. The new tax hikes, which will raise taxes up to 24%, will affect consumer goods like fuel, tobacco, and alcohol—especially significant when you consider the fact that Greece consumes more cigarettes per capita than any other country in Europe. Budget cuts, meanwhile, will lower payments to unemployed workers by about 2%, moving to 15% of GDP by 2019. This new legislation came less than a year after the country’s third international bailout, where 86 billion euros ($96.4 billion) was intended to give the Greek government more time to revive growth and implement reforms.
The failure of last year’s bailout has made finance ministers hesitant to try another bailout. Following this legislation, however, Eurozone finance ministers met in Brussels to discuss bailout options. The 19 ministers made a decision to unlock an additional 10.3 billion euros ($11.5 billion) in loans, noting that the deal was made possible through Greece’s recent economic reforms. The International Monetary Fund (IMF) is now considering contributing to the fund as well, despite having its reservations about a bailout without some form of debt relief. The decision made in Brussels will not reduce the amount of debt that Greece will have to repay, but debt relief will be phased in from 2018, after next year’s general election in Germany. Eurogroup President Jeroen Dijsselbloem has called this financial move “a major breakthrough” which will enable ministers “to enter a new phase in the Greek financial assistance programme.”
As it stands, Greece’s economy seems to be struggling more than that of any other country in Europe, with about a quarter of Greek citizens out of work. The unemployment rates themselves don’t help the economy either, as high unemployment has made for a major decrease in income tax revenue. And since these unemployed workers rely on pensions and other financial support from the government, the country’s budget is put under even more stress. And according to CNBC, despite Greece’s grave financial situation, the country spends more in relation to its GDP than any other country in Europe.