The Ancient Greeks have been recognized for their philosophical and democratic wealth throughout history.
Unlike their counterparts, Greeks in the 21st century cannot be honored for their financial prosperity. In fact, the Greek’s current financial crisis jeopardizes stability in the E.U. and the U.S.
In fact, modern Greece has survived five economic defaults and maintained a budget deficit every other year for the past 200 years, according to Kenneth Rogoff, former chief economist at the International Monetary Fund (IMF).
Balanced budgets aren’t part of Greece’s strong characteristics, so what? Despite rampant criticisms, the essential task is to examine Greece’s current situation in order to determine feasible solutions.
Along with other nations, seeds for the Greek financial crisis were placed throughout the past years. According to the Guardian a mixture of failing to follow budgetary reforms from the E.U. and operating through a medium–term economic outlook for the Euro in the previous Greek government contributed to economic turmoil.
Greece currently holds the E.U.’s largest budget deficit, which stands at 12.7 percent of its GDP, according to Business Week. The country’s major flaw for economic aid has been convincing investors that it can effectively allocate stimulus funds. Part of its current plan to battle the budget deficit is to raise taxes to forty percent to incomes lower than €75,000 ($102,810), further reported by Business Week.
Reducing the budget deficit remains an essential fiasco for the Greek government-interest rates on bonds must be paid. However, the Greek economy will undoubtedly continue to lag since consumer spending will become miniscule.
The European Central Bank has also taken initiative to minimize budget deficits. The Guardian further reports that Greece has met EU standards to cut its budget deficit; further economic plans look encouraging as well.
Greece’s financial crisis has had profound impacts on U.S. markets as well. In the past week, the Dow Jones Industrial Average has received numerous blows; the average has erased all recovery in the stock markets. The stocks’ downturn has specifically been receptive to Greece’s potential fault on paying interest rates on its bonds.
These concerns are legitimate and imminent. Still, according to the Wall Street Journal, Treasury Secretary Timothy Geithner has high confidence in his European counterparts to carefully handle the situation. One of Geithner’s main goals throughout this ordeal is to maintain the dollar’s strength.
A crisis of this magnitude also demands attention from the collective international community. Without a doubt, the G-7 nations will help determine key aspects of Greece’s recovery.
The Wall Street Journal further reports that “global stimulus efforts, foreign exchange policies, and financial-sector regulatory reform” will become the G-7 nations’ pending obstacles to confront.
International cooperation is imminent. The Euro, the official currency of the E.U. and 16 member-nations, is at risk of rapid deflation, according to the Financial Times. Maintaining the Euro’s current currency value should be an essential task.
Fortunately, there has been a relative consensus regarding the execution of maintaining the Euro’s value. The most beneficial market-aid will come from the IMF-this will also avoid political backlash over the economic issue.
Little debate remains over providing aid for Greece’s financial crisis. As part of the E.U., Greece must uphold its economy; otherwise, the E.U.’s economic prosperity will be minimal. Regardless of the course of action, the Greek government must be held accountable for their unsavory economic agenda.
Adding to the issues at hand, Europe and much of the westernized world will soon face a mass amount of people exiting the labor force: 24 percent of prime working-age population will be lost by 2050, and those over 60 years of age will increase by 47 percent, according to Professor Jack Goldstone at George Mason University.
The world economy faces drastic shifts in the looming future. In order to appropriately tackle those issues, pending problems must be solved immediately. For once, politics should not be part of the solution; let’s focus on the wellbeing of humanity.