Greek Debt Crisis Essay

The nation of Greece is currently in debt to its creditors to the amount of 321 billion Euros -- "approximately 180% of its annual economic output" -- effectively making the nation a debt-colony (Rankin). As of 2015, the IMF had pledged nearly 50 billion Euros to Greece (and had leant the nation more than 30 billion up to that point -- with the rest contingent upon Greece making payments that were already due). By May 2016, Greece's creditors -- known in the media as the Troika (European Commission, the ECB, and the IMF) -- were meeting to discuss the issue of loaning another 10 billion Euros to the embattled nation (Rankin).



The nature of the crisis that prompted Greece to apply for aid was this: it had become a member of the EU in spite of having less than stellar fiscal discipline. It had a trade deficit and when the Great Recession struck Europe in 2009, Greece was in no condition to stabilize. Even well before the Recession, Greece's credit rating had been going down (before finally being junked in 2010). Thus, in 2010, it applied for aid to the IMF (along with the EC and ECB -- the three of which made up the Troika, promising Greece over 100 billion Euros in loans to "bail" the country out of its debt and pending sovereign default. The loan was to cover the country through 2013 and was meant to be used to cover maturing bonds that Greece had sold to investors. Essentially, the IMF helped Greece to keep from defaulting on its debts to bondholders. By 2013 the loan had tripled.



The Stipulated Structural Adjustment program of the IMF for Greece has largely been a failure as Greece is still unable to pay its debts, poverty is on the rise, and the country is non-competitive (Myrodias). Thus, the loan has really done nothing for Greece -- it has simply enabled the country to keep from defaulting on loans it has made to investors -- i.e., bondholders of the nation's debt -- i.e., other banks. The IMF has backstopped Greek debt for the time being -- but the country itself is much worse off than it would have been had it simply defaulted on all its loans. It is now even more in debt and what sovereignty it has is a shell of its former self (the recent Greek elections are a testament to that). While defaulting on bondholders would have caused the country to suffer in the immediate short-term, its long-term prospects would have been far less bleak. Today, Greece is beholden to the Troika with no ostensible way of getting out as its country's leaders fail to show any real resolution to default on IMF payments for fear of what will happen to them should they dare to take such action.



Moreover, the crisis shows no signs of abating…