By CATIE MATSON
After much deliberating the European leaders announced Wednesday they would approve a second bailout of $180 billion to aid Greece in their finical debt. Many Europeans do not believe the other Eurozone countries should be paying for Greece’s mistakes. The uncertainty in Greece’s future leads to a passionate debate about what the next step should be, not just between the European leaders, but the citizens of Europe.
Vasileios Prassas, a Greek international student studying at St. Lawrence supports the idea that Greece must solve its own problems. “Greece should default and start over again,” said Prassas, “We should start a new country, and have a new beginning, if necessary away from the European Union.”
Since the debt crisis Helmut Weidhausser, a resident of Germany, has witnessed the struggle across Europe. He has a stable job, but it is difficult for him to see money that should be going towards Germany, going towards Greece. If things continue to be bad in Greece, there is no saying what effect it will have on Germany, especially if it means higher taxes for Germany.
“I understood it in the beginning, when the debt crisis was an issue for all of Europe, but now it is too much,” Weidhausser said. Taxes in Germany have not increased since the bailout, but many people in Germany share Weidhausser’s opinion. They are worried about what could happen in the future.
“Here in Germany we have families and children that don’t have enough to eat. Elderly people whose retirement funds are not enough to cover basic needs, and the sick that can’t cover health expenses. Now we are spending millions on others in different countries, but not helping our own country first,” Weidhausser said.
Many of the government and economics professors at St.Lawrence University debate this idea. Economists believe it would be more practical to drop Greece from the Eurozone, but the government professors don’t think this will happen because of politics.
“The Greeks had bad policies and should take their lumps. People who invested in much of the Greek debt should suffer the consequences of that too,” said Alan Lockard, professor in economics, said. Last year, in May 2010, Greece received a $154 billion bailout from the other European countries. Even with the bailout, Greece has been struggling to revive its economy.
“They should let Greece fail, because it is becoming increasingly difficult to sustain them,” Petrik Runst, professor in macro-economics and originally from Germany. So far the European leaders have been trying to avoid this option of letting Greece default. This is because many of the European banks, primarily the European Central Bank, have money invested in Greece. If they lose the money they loaned it will cause problems.
“The big rationale is to reward the Greeks and other people who have very bad policies and punish anyone that was prudent like the Germans. I don’t think this is a good long term strategy,” Lockard said.
Many people are trying to figure out how Greece got to this point before coming up with a solution. If Europe is to continue to help Greece out there are going to need to be some guidelines they should follow.
“When Greece joined the Eurozone, all of a sudden they had all this cheap money they could borrow. When they did it sent them spiraling into debt,”Adrienne Héritier, professor at European University Institute, said. Héritier is a professor in comparative and European public policy. The institute is located in Italy, letting her closely analyze the crisis.
Héritier also pointed out that the countries of Europe all have difference economies and social structure. This is one factor that lead to the crisis. “There are two option. We can rescue and retreat or we can let Greece default, the latter is probably the better option for Europe,” Héritier said. Rescue and retreat is the current option the European leaders have been using. This option requires cut backs on debt payments and salaries. This option will last many years.
Héritier proposes letting Greece default. They won’t have credit for ten years and there should be a marshall plan for others to engage in investments to increase their economy. The problem with this proposal is that many of the European banks do not want to Greece to default because they will lose all the money they invested.
Héritier countered this argument by stating that as it is Greece is only expected to pay back 40 percent of their debt. The banks are already out 60 percent. But for this plan to work though there needs to be an enormous amount of financial resources.
This finical crisis started back in 2009, when Greece was unable to pay back their debt to neighboring countries. Greece joined the Eurozone in 2001, but later admitted to lying about their true deficit.
In Brussels, Belgium many of the European leaders met to discuss the economic and financial future of Europe and what action to take with Greece. There is a lot of uncertainty and many issues such as the increasing debt levels and government deficit, that need to be resolved not just for the short term, but in the long term as well.
“It is not clear what the breaking point will be for Europe,” Runst said in regard to Greece’s financial debt. When Greece showed that they were still unable to fix their economy, the leaders met again in Brussels. With the new bailout of $180 billion on the table, there is much hope that Greece will be able to recover its economy.