Living beyond their Means

Greece is in very deep waters. The economy of the country is totally shattered largely because the people of Greece have lived beyond their means for quite some time now. The government has made matters worse by borrowing heavily from all over the world (particularly from Germany) and presenting a false picture of its deficits to the rest of the world. It was only in October 2009 that it announced that it had been understating its deficit figures for several years, thereby raising alarms about the soundness of Greek finces.  Suddenly, Greece was shut out from borrowing in the fincial markets. By the spring of 2010, it was veering towards bankruptcy, which in turn, threatened to set off a new fincial crisis. In order to avert a calamity, the Intertiol Monetary Fund, the European Central Bank and the European Commission issued the first of two intertiol bailouts for Greece, which would eventually total more than €240 billion or about $264 billion at today’s exchange rates. The bailouts came with stiff conditions. Lenders imposed harsh austerity terms, calling for deep budget cuts and steep tax increases. They also insisted on Greece overhauling its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business. Unfortutely, what Greece received as bailouts went to repay old debts rather than stabilizing its finces and quelling market fears that the Euro Union itself could break up. Unfortutely, the situation is unlikely to mend in the near future for the simple reason that the people of Greece are unwilling to accept stern austerity measures and economists themselves are not very sure that austerity measures alone could bring about a swift and effective change in the tion’s economy. What has happened to Greece is the outcome of a long spell of irresponsible spending of borrowed money. What is happening in Greece today must remind a lot of people about what happened in Germany during 1928-1929. Germany too borrowed and spent recklessly on unproductive war preparations that brought about one of the worst spells of inflation that the world has ever witnessed.