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Greece Needs More Money, Again

It was reported today that Greece needs an extra 15 billion euros in order to bring its debt down to a workable level. Greece is currently in negotiations with private investors, which could end in a deal that could reduce the Greek debt burden by up to 100 billion euros. It was hoped that a […]

It was reported today that Greece needs an extra 15 billion euros in order to bring its debt down to a workable level. Greece is currently in negotiations with private investors, which could end in a deal that could reduce the Greek debt burden by up to 100 billion euros. It was hoped that a deal would make a bailout from the Eurozone bailout fund and the IMF more plausible, however a European Union official has suggested that such a deal would not restore enough confidence in the Greek economy to secure additional funds. 

The main challenge for the Greek government is to somehow find a way to cut spending and implement a feasible debt reduction program while the domestic economy is struggling and the recession is worsening. There are a number of political obstacles that must be overcome before fiscal decisions are considered. The EU and IMF will not consider a bailout unless the Greek government is able to make labor market reforms, which of course involves talks with unions. At this time, these talks are still ongoing. The negotiations will be difficult, especially considering the fact that lowering of the minimum wage is being considered.

It has not been a good last few days for Europe. A fiscally binding treaty that would give power to the unelected European Commission to scrutinize the budgets of constituent nations has strong support despite objections from the Czechs who are concerned that some of the treaty’s obligations conflict with its own constitution, and the British, who have not had their concessions considered. Sarkozy, who is up against a strong socialist opposition in the upcoming French elections, has announced a financial transaction tax due to be implemented in August.

Whether it is for political gain or to dismiss accusations of idleness, the actions being taken in Europe are only prolonging the economic crisis Europe finds itself in. The powers that be in Europe are taking the chance to consolidate power and make a mockery of democracy in the name of solving a crisis largely of their own making. Even were Greece to reform its labor market and collect all of the extra funds it needs through private investment and another bailout, its stability would still be far from guaranteed.

Image: Shutterstock: zimmytws

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