It’s tough to not immediately zone out when you hear the words “sovereign debt crisis,” but what’s happening right now in Greece is incredibly serious. Since the world was plunged into a recession in 2008, the Eurozone has been trying to stabilize itself through drastic austerity measures that aim to cut spending so that smaller member nations can pay back their creditors (multinational banks and other larger Eurozone countries). For small indebted countries like Greece, these measures have been more punitive than restorative, leaving an already weak country even worse off, and facing decades of pain ahead of them.
But when it comes to the nitty-gritty of the past few months, it’s a bit tough to stay focused. That’s where these beautiful women come in. Let them guide us.
Well, hello! Oh, where were we. Right, so in 2009, in the aftermath of the 2008 world financial crisis, Greece announced that it had long been understating how much it owed its creditors. Like, by a lot. Greece was consequently barred from world financial markets until a payment plan could be devised. This was done in 2010 in the form of a 240 billion euro bailout. But, this bailout came with conditions. Punishing austerity measures cut into quality of life in the country, while taxes were raised to try to generate enough money to pay back its (now even more plentiful) creditors.
"But why didn’t that work?", asks the beautifully befuddled woman in her underwear directly preceding this paragraph. Well, it turns out a lot of the bailout money went to paying off Greece’s international creditors instead of being put back into the economy where it would stand a chance of re-igniting the moribund Greek economy. Greek’s lenders essentially turned on a faucet, and then immediately redirected the stream of money to its creditors, instead of to the Greek people themselves.
And this didn’t sit right with the Greek people at all. A new political party, Syriza, began to gain power, culminating in their victory in the parliamentary election in January of 2015. Syriza and its charismatic young leader Alex Tsipras, promised to get Greece a fair deal in negotiations for their next much-needed bailout. Tsipras rejected the German-led notion that austerity was the best way to get the Greek economy back up and running and kept pushing the European Union to offer better terms. The German-led European Union refused to budge, however, and by the beginning of this summer, Greece was running out of money.
Faced with a choice between capitulating to German demands of austerity or leaving the European Union entirely (with possible worldwide economic consequences), Tsipras decided again to return to the polls, bringing the newest bailout proposal in front of the Greek people. Either they would agree to German terms, or Greece would be ready to face the future without its European friends.
In an overwhelming majority, the Greek people voted “No” to the bailout terms on July 5th. There was jubilation in the streets and Tsipras felt ready to return to the bargaining table with a unified country behind him. Maybe now the Germans would listen to the Greeks, and finally believe that austerity did more harm than good.
But it was not to be. Even with the “No” vote in his pocket, Tsipras was unable to sway European Union negotiators, and sure enough, they still forced him into taking an agreement that will send more money towards Athens on the condition that they will continue austerity measures. Greece was also denied a write-down on its current debts, which are now more than an already unfathomable €300 billion.
So now these beautiful women have gotten you to the end of this article and you’re asking what’s next. Well, a lot of pain for the Greek people. They will be forced to continue selling off government assets in an attempt to raise money, as well as be subject to the instructions of the International Monetary Fund, further giving up national sovereignty.
In response to the deal, the hashtag “#ThisIsACoup”began popping up on social media. In essence, Greece has lost its ability to self-govern. Whether the Greeks will continue to accept this in the long-term remains to be seen. What is known however, is that austerity, time after time, fails at generating the economic outcomes that are supposedly desired, and instead continues to transfer wealth from the majority to the gilded few.
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