As the EU and the United States continue to struggle with the ongoing migrant crisis stemming from the ongoing civil war in Syria, another crisis that has occupied the EU in the past, has started bubble up to the surface again as lenders start to pressure on Greece to implement economic reforms it agreed to for its recent bailout that it agreedto, which would be its third in five years.
The issue at hand ( among one of many) which has caused a series of strikes to flare up in Athens starting yesterday, November 12th bringing the capital city to a standstill is the issue of allowing Greeks who cannot pay the mortgage on their homes to keep their homes due to the economic hardships.
“The total capital shortfall for the Greek banks falls within the 25 billion Euro buffer earmarked in the ESM program for the bank recapitalization” an anonymous official for the ESM said on Saturday October 31st regarding whether Greek banks have enough money to cover the bills.
The ESM stands for the European Stability Mechanism, which was created to help heavily indebted European countries during the debt crisis which struck the countries of Greece, Portugal and Spain starting in 2009 after the global economic crisis of 2008.
If the lending countries and Greece cannot come up with an agreement on how the issue of foreclosed homes are handled, than the whole bailout might be at stake as the two are interconnected and if they cannot agree on this issue then the whole bank bailout portion of the agreement may be at stake.
“ It shows that that the ESM program was adequately funded for this purpose and that the maximum program lending to Greece will effectively be less than the 86 billion originally initially envisaged” the ESM official continued in his statement.
Greece has been struggling with an abnormally high unemployment rate since it was hit by the worldwide economic crisis in 2009 and has been going downhill economically ever since. The current unemployment rate sits at 24.6% when stats were last available in August, which was down from 24.9%. The highest unemployment rate in Greece during the crisis was 27.89% during the height of the crisis in September 2013.
In order for the bailout agreement to take place, the Greek government agreed to a series of strict spending cuts and tax hikes, also known as austerity in order to bring its spending under control. Greece’s debt currently sits at $352.7 billion Euros which it owes to its international lenders, mainly Germany and the EU along with the IMF.
The country was in the headlines most of the summer when its citizens voted down the bailout in a July referendum with 61.31% voting no and 38.69% voting yes, sparking fears that the vote could leave the EU leading to other heavily indebted EU countries ( Spain and Portugal) leaving as well causing a dissolving of the organization.
“A sum of 10 billion Euros has already been mobilized and it’s sitting at a segregated account managed by the ESM” the official continued. “This will be made available quickly to Greece. With sufficient private sector participation, the remaining 15 billion euros will not be needed.”
Ultimately, the international lenders and Greece should come to an agreement which benefit both Greece and the creditors but if Greece does not change its spending habits than the international lenders have a right to be skeptical if Greece after all these years has is serious about reducing its debts and paying back what it owes to the international lenders.