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Nobel Prize in Economics

Thursday, October 13th, 2016

October 13, 2016

On October 10, the Royal Swedish Academy of Sciences in Stockholm, Sweden, awarded the 2016 Nobel Prize in economics to two United States-based economics professors. British-born Oliver Hart of Harvard University in Cambridge, Massachusetts, and Bengt Holmström of Finland, who works at the Massachusetts Institute of Technology (MIT), also in Cambridge, shared the prize for their research in contract theory. Contract theory is a comprehensive framework for analyzing a diverse range of issues involving contractual relationships. Such issues include performance-based pay for top executives, insurance deductibles and co-pays, and the privatization of such public-sector institutions as hospitals, schools, or prisons.

Nobel Prize medal (Credit: Nobel Foundation)

Nobel Prize medal (Credit: Nobel Foundation)

Noting that modern economies are held together by innumerable contracts, the academy said that “the new theoretical tools created by Hart and Holmström are valuable to the understanding of real-life contracts and institutions, as well as the potential pitfalls in contract design.” The work by the two economists is aimed at helping individuals, businesses, and others determine whether the agreements that bind them together are in their best interests.

Holmström, a longtime director on the board of the Finnish telecommunications giant Nokia, began his research on contract theory in the 1970’s. He demonstrated how a contract between a company’s shareholders and its top executives should be designed to link performance to pay incentives. He later generalized his research to link employee performance to pay and potential promotion incentives.

In the 1980’s, Hart’s work focused on incomplete contracts. His work explored how contracts do not always reflect reality because it is impossible for a contract to specify every eventuality when it is written. His work spells out control rights in contracts, specifying which party should be entitled to make decisions in which circumstances when problems arise. Hart’s findings have had a vast impact on several fields of economics, as well as in political science and law.

Hart was born in 1948 in London, England, and is now a U.S. citizen. He received a Ph.D. degree in 1974 from Princeton University in New Jersey. Hart is the Andrew E. Furer Professor of Economics at Harvard, where he has taught since 1993. Holmström was born in 1949 in Helsinki, Finland. He received a Ph.D. degree in 1978 from Stanford University in California. He is the Paul A. Samuelson Professor of Economics and Professor of Economics and Management at MIT.

Tags: contract theory, economics, nobel prize
Posted in Business & Industry, Current Events, Economics, People | Comments Off

United Kingdom Votes for “Brexit”

Friday, June 24th, 2016

June 24, 2016

 A London taxi driver waves a Union Jack flag in Westminster, London after Britain voted to leave the European Union in an historic referendum which has thrown Westminster politics into disarray and sent the pound tumbling on the world markets.  Credit: © Stefan Rousseau, PA Wire/AP Photo

On June 24, 2016, a taxi driver waves the Union Jack in Westminster, London, after British voters narrowly chose to leave the European Union in the historic “Brexit” referendum.
Credit: © Stefan Rousseau, PA Wire/AP Photo

Yesterday, June 23, British voters went to the polls to decide whether the United Kingdom (UK) should remain in the European Union (EU)—a contentious referendum nicknamed “Brexit” (British exit). By a 51.9 to 48.1 percent margin, voters narrowly chose to “leave,” sending shock waves throughout the UK as well as the rest of the world. Most business and world leaders had backed and expected a “remain” victory, and opinion polls too had predicted a narrow “remain” majority. Global economic markets and currencies dropped sharply upon the news, and British Prime Minister David Cameron, a strong “remain” backer, announced he would resign from office in the coming months. More than 33 million people voted in the Brexit referendum, a turnout of 72.2 percent.

The UK government is not bound by the “leave” vote, but politicians will no doubt respect its result. The process to leave the EU could take years, but the UK’s place in the partnership is immediately jeopardized. The UK could be excluded from votes on long-lasting matters and other topics of importance (such as its own Brexit). The European Parliament will hold an emergency session next week to discuss the vote’s result.

The consequences of the “leave” vote—beyond removing the UK from the EU—are widespread, lengthy, and somewhat uncertain. Cameron’s fall could be followed by many others, including that of Labour Party leader and fellow “remain” backer Jeremy Corbyn. The Brexit vote could also propel one of its most vocal supporters, former London Mayor Boris Johnson, into the vacancy soon to be left by Cameron as leader of the Conservative Party and possibly as prime minster as well. Other political ramifications could be the dissolution of the United Kingdom itself, as Northern Ireland and Scotland, who both voted against the Brexit, will be forced out of the EU against their will. Scotland in particular seems likely to revisit an independence referendum that was voted down less than two years ago. The vote also weakens the EU (the UK is the third largest contributor to the EU budget), and gives hope and strength to budding exit movements in other parts of Europe. Economically, time will determine how severe and long-lasting the currency and market crash will turn out to be. The Brexit vote also created panic and uncertainty among the hundreds of thousands of British citizens living and working in other parts of the EU.

To drum up support from right-wing British parties (which had long called for an EU exit), Prime Minister Cameron promised a future “in/out” EU referendum in 2013. The move helped Conservatives win parliamentary elections in 2015, but many party members then went against Cameron, who did not support a so-called Brexit. A “remain” victory—which at first seemed a near certainty—then fell into doubt. Right-wing groups and many others joined the “leave” camp. They based their support for an EU withdrawal on hopes of cutting off immigration, extricating the nation from the EU’s perceived heavy-handed bureaucracy, and “taking back control” of the UK’s place in the world. They also blamed Europe—the perceived gateway for migrants and refugees from elsewhere in the world—for such domestic problems as unemployment, stagnant wage growth, and high home prices. “Remain” voters supported the generally more favorable diplomatic, economic, logistical, political, and social conditions of EU membership.

By design and negotiation, the UK has been an unusual EU member since the partnership began in 1993. Most obviously, the UK did not join the Economic and Monetary Union when it was formed in 1999—meaning the British decided not to use the euro single currency (as do most EU members)—choosing instead to retain the pound sterling. Also, the UK is not part of the Schengen zone of passport-free travel (which includes the rest of the EU except Ireland). And, despite trailing only France and Germany in contributions to the EU budget, the amount the UK contributes as a percentage of its gross national income is the least of all EU member states.

Tags: brexit, european union, politics, united kingdom
Posted in Business & Industry, Current Events, Economics, Government & Politics | Comments Off

Nigeria’s Niger Delta Avengers

Wednesday, June 15th, 2016

June 15, 2016

On June 10, 2016, in the oil hub city of Warri in Nigeria’s Delta State, a billboard asks for citizens’ help against the Niger Delta Avengers’ campaign of oil industry disruption. © Stefan Heunis, AFP/Getty Images

On June 10, 2016, in the oil hub city of Warri in Nigeria’s Delta State, a billboard asks for citizens’ help against the Niger Delta Avengers’ campaign of oil industry disruption. © Stefan Heunis, AFP/Getty Images

On Monday, June 13, Nigeria’s Niger Delta Avengers (NDA) announced they were ready to talk with the west African nation’s federal government. The NDA—a militant group that has attacked petroleum and natural gas installations in the Niger River Delta—has strict preconditions, however, before a dialogue can be arranged. The NDA insists that damaged pipelines and facilities remain out of service, and that the selling of crude oil be suspended. The group wants international oil companies at the talks and a commitment from the government to improve conditions in the impoverished and badly polluted delta. The government, desperate to stop the attacks and regain the delta’s fossil fuel wealth, has recently called off military efforts against the NDA. The government, however, may be unwilling or unable to comply with the militant group’s pretalk conditions.

The NDA grabbed the government’s attention earlier this year by launching “Operation Red Economy,” systematic attacks meant to cripple the Niger Delta’s rich oil and gas industry. NDA sabotage has destroyed or forced the closures of pipelines, terminals, and wells belonging to such oil giants as Chevron, Royal Dutch Shell, and Italy’s ENI. Nigeria’s oil production has since been reduced to its lowest level in 20 years.

The NDA emerged from the remains of previous militant groups in the Niger Delta that fought for control of the region’s oil wealth as well as independence from the Nigerian government. The NDA’s crusade, however, has largely centered on the economic well-being of delta citizens and the restoration of land and water contaminated by spills and irresponsible oil and gas exploration. The NDA has thus far avoided open warfare with Nigerian troops and has followed self-imposed rules against kidnapping or killing. The NDA has ominously warned, however, that these rules could change.

The Niger Delta forms the southernmost region of Nigeria, along the Gulf of Guinea. It consists of deposits of clay, mud, and sand at the mouth of the Niger River. Lagoons and mangrove swamps cover much of the region. Large-scale oil and gas extraction in the delta began in the 1950′s.

Tags: africa, niger delta avengers, nigeria, oil industry
Posted in Business & Industry, Conservation, Current Events, Economics, Energy, Environment, Government & Politics | Comments Off

Economic and Political Crises in Venezuela

Wednesday, May 18th, 2016

May 18, 2016

Last Friday, May 13, Venezuelan President Nicolás Maduro decreed a 60-day state of emergency that increased executive, military, and police powers. It was the second time this year that Maduro had issued such a decree. He said the latest was intended to “to tend to our country and, more importantly, to prepare to denounce, neutralize, and overcome the external and foreign aggressions against our country.” The president has long accused his political opposition and foreign powers, particularly the United States, with economic and political sabotage.

People line up to try to buy toilet paper and diapers outside a pharmacy in Caracas, Venezuela, on May 16, 2016. Credit: © Carlos Garcia Rawlins, Reuters

People line up to try to buy toilet paper and diapers outside a pharmacy in Caracas, Venezuela, on May 16, 2016. Credit: © Carlos Garcia Rawlins, Reuters

Like his predecessor, President Hugo Chávez, Maduro has relied upon revenue from oil, Venezuela’s top export, to support the nation. However, a sharp fall in the global price of oil since the early 2000’s has ravaged the economy. Critics of the Socialist government also blame the crises on the failures of Chávez and Maduro to diversify the economy, save, and make long-term investments in such services as education and health care. In addition, the government has refused to accept aid from such international lending organizations as the International Monetary Fund.

By early 2016, Venezuela could not afford much-needed imports. Ordinary Venezuelans suffered from severe shortages of staple foods, medicines, and other basic products. In addition, skyrocketing inflation reduced the worth of their salaries. Health workers lacked basic medicines and supplies, and broken medical equipment could not be replaced. Shortages of water and electric power, caused by drought, also have had a large impact. To save power, the government declared a two-day work week for civil servants and implemented rolling blackouts. In many cases, hospitals lack electricity to operate life-saving equipment and even the water to clean medical facilities.

The economic problems coincided with a political struggle between Maduro and Venezuela’s legislature, the National Assembly. In December 2015, the Democratic Unity opposition coalition, led by Henrique Capriles, won a majority of Assembly seats. It was the first time in over 15 years that the Socialists lost control of the legislature. However, Maduro and the Supreme Court have blocked most of the Assembly’s new legislation, and Maduro has said it is a matter of time before the Assembly disappears. Opposition members in the Assembly vowed to oust Maduro by legal means. But, in April 2016, the Supreme Court blocked an attempt to shorten Maduro’s term by constitutional amendment and, in May, electoral authorities appeared to be delaying formal proceedings that could lead to a recall referendum on Maduro’s rule.

Amidst this economic and political climate, public demonstrations and looting have become increasingly common. A recent poll indicated that about 70 percent of Venezuelans wanted Maduro out of office, and the opposition collected nearly 2 million signatures, far more than needed, to legally kick start a recall referendum. Capriles called on the military to choose between the Constitution and Maduro. For now the president is hanging on, but his shelf life may be limited.

Tags: economic crisis, nicolás maduro, venezuela
Posted in Current Events, Economics, Government & Politics | Comments Off

Brazil Begins Impeachment Proceedings Against Rousseff

Thursday, May 12th, 2016
Brazil's President, Dilma Rousseff, during the credencials ceremony for new ambassadors at the Itamaraty Palace, in Brasilia, Brazil, on August 12, 2011. Credit: AP Photo

Dilma Rousseff became president of Brazil in 2011. She was the first woman to hold that office. Credit: AP Photo

May 12, 2016

Brazil’s political landscape became yet more complex today, as the nation’s Senate began impeachment proceedings against President, Dilma Rousseff (JEEL mah ROO sehf). (The act of impeachment is a formal vote taken by a legislative body accusing a high-ranking government official of serious wrongdoing and sometimes includes the trial that follows.) Roussef is accused of financial irregularities; her critics claim that she delayed making debt payments to state-owned banks to hide budget deficits.

This accusation comes at a time when Brazil’s government is enmeshed in a serious corruption scandal. The state-owned oil firm Petrobras (Petróleo Brasileiro), one of the largest corporations in Latin America, was formed in the 1950′s and privatized (sold to private investors) in the 1990′s. Then, the Worker’s Party (known as PT, for Party Partido dos Trabalhadores in Portuguese), led by President Luiz Inacio Lula da Silva (loo EESH ee NAHS yoo LOO luh duh SIHL vuh), restored Petrobras to state control. Brazil now owns the largest share of the company. Worker’s Party politicians are accused of putting their own candidates in top executive positions at Petrobras. Around 3 percent of the money paid to the company was then siphoned off to the PT, which used the proceeds for bribes and campaign funding. Directors at Petrobras and construction companies, the latter accused of overcharging for oil-refinery construction, also stole millions of dollars for themselves. More than one-third of the members of Brazil’s Congress are caught up in Petrobras investigations. President Rousseff is not directly accused of taking money in the Petrobras scandal but, before she became president of the nation in 2011, she was director of Petrobras from 2003-2010. Critics claim her campaign funds were partly financed with Petrobras money. 

In addition to this scandal, Brazil’s economy, once one of the strongest in the emerging market nations, is in a deep recession, in part because of the downturn in oil prices, but also because of failed government economic policies, Brazil’s GDP (gross domestic product, the market value of all final goods and services produced in a country during a year) has decreased to 2009 levels. The economy shrank 3.8 percent last year and is forecast to decrease more than 3 percent this year. In addition, consumer spending is down, inflation is at 7 percent, and unemployment is on the rise. There are 3 million more unemployed people in Brazil than there were one year ago. This has led to massive demonstrations and street protests.

Rousseff must step aside while her case is tried by the Brazilian Senate. Vice President Michel Temer will step in for Rousseff during this interim. He has a very big job ahead of him. In addition to political and economic problems, Brazil is caught in a health emergency. In fewer than 100 days, the Summer Olympics are scheduled to begin in Rio de Janiero. Meanwhile, the outbreak of the Zika virus in Brazil has led to serious birth defects in more than 1,000 infants and to calls for the games to be moved or postponed.

Other Behind the headline

Brazil Challenged From All Sides (March 15, 2016)

 

 

 

 

 

 

Tags: brazil, dilma rousseff, petrobras
Posted in Current Events, Economics, Government & Politics | Comments Off

Panama Papers Heat up Iceland

Thursday, April 7th, 2016

April 7, 2016

Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson.  Credit: Control Arms (licensed under CC BY 2.0)

Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson stepped down on April 6, 2016, due to revelations in the so-called Panama Papers.
Credit: Control Arms (licensed under CC BY 2.0)

Yesterday, April 6, Iceland’s Prime Minister Sigmundur Davíð Gunnlaugsson resigned from office. Gunnlaugsson had enjoyed fair popularity since taking office in 2013, but his downfall came quickly and loudly. On April 3, Gunnlaugsson and his wife were among the international figures named in the controversial Panama Papers. The papers consist of millions of confidential documents detailing secret offshore bank accounts used by wealthy world leaders, celebrities, and others for various purposes, including money laundering and to avoid paying taxes in their home countries. The papers—leaked from the Panama-based international law firm Mossack Fonseca—raised widespread questions of corruption or at least of unseemly legal deception.

The Panama Papers revealed transactions between the Gunnlaugssons, offshore companies, and the Icelandic banks that were at the heart of that nation’s financial collapse in 2008. While the nation plunged into economic chaos, the Gunnlaugssons profited handsomely—and secretively. Gunnlaugsson denied any legal wrongdoing, but the people of Iceland, who paid a hefty price for their nation’s financial recovery, were not interested in the legality of his actions. Large protests and demonstrations erupted immediately, calling loudly for Gunnlaugsson’s resignation. After failing to rally support, Gunnlaugsson reluctantly stepped down.

Gunnlaugsson was the first casualty of the Panama Papers, but he won’t be the last. Other world notables attached to the documents include top leaders (or their friends and relatives) from Argentina, Brazil, China, Chile, India, Malaysia, Mexico, Pakistan, Peru, Qatar, Romania, Russia, Saudi Arabia, South Africa, Spain, Syria, Ukraine, the United Arab Emirates, and the United Kingdom. Others named in the papers include world soccer’s already-troubled governing body, FIFA, as well as many of the sport’s star players. Many others have been named too, and the investigation is just gaining traction. Stay tuned.

Offshore companies often provide financial and legal advantages for investors. Among the benefits are privacy, little or no taxation, and no deposit regulation—meaning no alarms are raised if you suddenly deposit, say $1 million. If you deposited $1 million in your corner bank, the Internal Revenue Service would soon be in contact with a list of questions beginning with where did you get it?

 

Tags: iceland, offshore companies, panama papers, Sigmundur Davíð Gunnlaugsson
Posted in Business & Industry, Current Events, Economics, Government & Politics | Comments Off

Scottish-American Economist Wins Nobel Prize

Monday, October 12th, 2015

October 12, 2015

Nobel prize medal (Credit: Nobel Foundation)

Nobel prize medal (Credit: Nobel Foundation)

Today, October 12, Angus Deaton, an economics professor at Princeton University, won the 2015 Nobel Prize in economics. The Royal Swedish Academy of Sciences awarded the Memorial Prize in Economic Science to Deaton for “his analysis of consumption, poverty, and welfare.”  The Nobel academy said that Deaton has enhanced the understanding of choices on consumption made by individuals and that Deaton’s work has helped economists in designing “economic policy that promotes welfare and reduces poverty.”

Deaton is best known for his research in the areas of health, wellbeing, and economic development. The Nobel committee said that by linking detailed individual choices and aggregate (combined) outcomes, Deaton’s research has helped transform such modern fields of economics as microeconomics, macroeconomics, and development economics. According to the academy, Deaton “has consistently tried to bring theory and data closer together through his mastery of measurement and statistical methods.”

Deaton was born in Edinburgh, Scotland, on Oct. 19, 1945. He taught at Cambridge University and at the University of Bristol before moving to the United States. He holds dual British and American citizenship. Deaton is the Dwight D. Eisenhower professor of economics and international affairs at Princeton’s Woodrow Wilson School of Public and International Affairs.

His latest research focuses on the important factors of health in rich and poor countries, as well as on the measurement of poverty in India and around the world. His 2013 book, The Great Escape: Health, Wealth, and the Origins of Inequality, examines how it is that while most people in the world have gained in wellbeing as gross domestic product (GDP) has risen internationally, some groups have missed out entirely on these benefits.

 

Tags: angus deaton, economics, nobel prize
Posted in Current Events, Economics | Comments Off

An Economic Pivot to Asia

Tuesday, October 6th, 2015

October 6, 2015

If ratified by the countries party to it, the Trans-Pacific Trade Agreement will cover goods as diverse as automobiles, drugs, and clothing. © Junko Kimura, Getty Images

On Monday, October 5, trade ministers from the United States, Australia, Japan, and nine other Pacific Rim nations reached a deal on the Trans-Pacific Partnership (TPP), a sweeping trade liberalization pact that will cut trade barriers and set common standards. The deal paves the way for individual governments’ approvals—something much easier said than done, especially in the often-dysfunctional U.S. Congress. The other TPP countries are Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

If the TPP is approved, it will be the largest regional trade accord in history, representing two-fifths of the global economy. The major points of the TPP include the reduction of tariffs and import restrictions, protections for copyrights and other intellectual property, the enforcement of common labor and environmental rules, and the creation of a forum for international legal challenges.

The TPP is much more than a trade deal, as it creates a common and fair platform on which all member economies must agree to operate. Labor practices, for example—including working hours, wages, work environment, and pollution—would have to meet the same standards in each country. The deal also allows such American exports as agricultural products, cars and trucks, consumer goods, information technology, and machinery to enter countries that currently limit or ban such imports to protect their own industries. Crucially, the TPP also creates an alternative to the current Asia-Pacific economy dominated by China—an economy lacking in the fundamental protections and requirements of the TPP.

In June, the U.S. Senate gave U.S. President Barack Obama “fast-track” authority to negotiate the TPP, meaning the Congressional approval vote will be free of amendments or filibuster. Securing enough votes for approval, however, will require some wheeling and dealing. Many Democrats fear the deal’s impact on trade unions, as well as its Wall Street- and corporate-friendly details. Many Republicans oppose the deal because they fear the loss of American jobs and simply because it was Obama’s initiative. A vote on the TPP will most likely not occur until 2016—an election year, so anything can happen.

Back in time articles

  • International trade (2014), (2013), (2012)

Tags: asia, trade agreements
Posted in Business & Industry, Current Events, Economics, Government & Politics, Working Conditions | Comments Off

Francis in New York and Philadelphia

Monday, September 28th, 2015

September 28, 2015

Pope Francis, shown here greeting the crowd from a balcony of St. Peter’s Basilica in Vatican City in 2013, made his first visit to the United States last week. AP Photo

Last week, the pope arrived in New York City on Thursday evening, September 24, and held evening prayers at St. Patrick’s Cathedral in midtown Manhattan. The next day, September 25, Francis began his day at the United Nations, where he spoke to the General Assembly. Much of the pope’s UN speech concerned the environment and social justice. Francis remarked to the General Assembly:

“The ecological crisis, and the large-scale destruction of biodiversity, can threaten the very existence of the human species. The baneful consequences of an irresponsible mismanagement of the global economy, guided only by ambition for wealth and power, must serve as a summons to a forthright reflection on man….”

After leaving the UN, Francis held an ecumenical service at the National September 11 Memorial and Museum and visited a Roman Catholic grade school in East Harlem before saying Mass at Madison Square Garden for a crowd of some 20,000 people. The pope’s message in his sermon was again about the forgotten and marginalized of society and the need for justice for all.

On Saturday, September 26, Francis arrived in Philadelphia. After holding a Mass for clergy at the Basilica of Sts. Peter and Paul, he spoke at Independence Hall, the scene of some of the most important events in American history, on religious freedom and immigration. He reminded Americans that the principles on which their nation was founded must be “constantly reaffirmed.” To Hispanic Americans in the crowd, Francis, himself the son of Italian immigrants to Argentina, remarked, “I ask you not to forget that, like those who came before you, you bring many gifts to your new nation.” 

On his final day in the United States, September 27, Francis visited a seminary (school for future priests) just outside of Philadelphia and a prison in Philadelphia. Afterward, one million people lined Benjamin Franklin Parkway to cheer for the pontiff as he traveled by popemobile to his last public event. At this open-air Mass outside the Philadelphia Art Museum, Francis called on everyone to see their families and homes as “domestic churches” and to act with tenderness and compassion in this personal setting.

Sunday evening, Francis ended his historic visit and returned to Rome.

Other Behind the headline article:

  • Francis in Cuba (Sept. 22, 2015)
  • Francis in Washington, D.C. (Sept. 25, 2015)

 

Tags: new york city, philadelphia, pope francis
Posted in Current Events, Economics, Environment, Religion | Comments Off

Greece Gives Tsipras a Second Chance

Friday, September 25th, 2015

September 25, 2015

On Monday, September 21, Alexis Tsipras was sworn in as Greek prime minister for the second time in 2015. Economic and political turmoil ended his first brief tenure after just seven months, but the turmoil also brought him right back again a month later.  So what’s going on Greece? Well, let’s go back in time to 2001…

Alex Tsipras, leader of the anti-austerity party Syriza, speaks to supporters after the parliamentary elections in Greece on Jan. 25, 2015. Credit: AP Photo

To join the eurozone in 2001, Greece needed to show the European Union (EU) that its budget deficit was not greater than 3 percent. To meet that target, Greece falsified its books to make its economy look better than it truly was. For example, in 2004, Greece reported a budget deficit of 1.5 percent to the EU. A recent CNN report states that the actual deficit for 2004 was around 8.3 percent.

When the global economic downturn began in 2007, Greece was still fudging it, spending more money than it earned, and borrowing to make up the difference. This put Greece in a worse position than most EU nations to weather the sudden economic storm. And, the recession weakened the international banking sector, preventing Greece from refinancing its large amount of debt. By 2010, Greece could no longer make debt payments. Many nations might have defaulted, but the EU didn’t want this to happen to one of its member nations. So the EU bailed Greece out, providing a loan of 110 billion euros (around $160 billion in 2010 currency).

Greece used the money to make debt payments, but austerity measures (economic belt-tightening) forced on Greece by the EU caused many Greek people to lose their jobs. By 2012, unemployment in Greece had reached 25 percent. While unemployment went up, Greece’s Gross Domestic Product (GDP) went down. GDP is the market value of all goods and services produced in a country during a given period. Economists use GDP to measure a nation’s economic growth. Things were not looking good for Greece’s economy, so the EU loaned the nation another 136 billion euros (around $170 billion in 2012 currency).

Despite the influx of cash to help pay its creditors, austerity measures continued to stifle the Greek economy, and the nation still could not balance its budget. The economic situation for the Greek people spiraled down to the point that it was compared to the Great Depression of the 1930′s.

When Tsipras became prime minister for the first time in January 2015, the Greek debt had climbed to 175 percent the value of its GDP, unemployment was at 30 percent, and household income had dropped by around 35 percent. Tsipras and his SYRIZA party came to power promising to keep Greece in the EU, end austerity, and negotiate a reduction in the level of Greek debt owed to creditors. After a difficult early summer and very unpleasant negotiations with EU officials in Brussels, Tsipras was unable to persuade the EU to end austerity measures or to reduce the amount of debt owed by Greece to EU banks or other creditors. Tsipras did, however, narrowly keep Greece in the EU.

Tsipras resigned his office in August and ordered an election for September. He wanted to see if the people of Greece would re-elect his party to office despite missed campaign promises—and despite a new 86-billion-euro ($95-billion) bailout agreed to the month before, promising further austerity measures. The Greek economy has contracted 29% since 2009 and continues to  shrink. Still, the people gave Tsipras a second chance. Many stated that, even though he was not successful, they felt he had fought hard on issues that were important to ordinary people.

Other Behind the headline articles:

  • Anti-Austerity Party Wins Greek Parliamentary Elections (January 26, 2015)
  • Greece Gets a Reprieve (February 26, 2015) 
  • Greece Closes Banks, as Economic Crisis Escalates (June 29, 2015)
  • Greece Votes Oxi! (July 6, 2015)
  • EU agrees to bailout terms for Greece (July 13, 2015)
  • A Greek Tragedy (July 16, 2015)

 

 

 

 

Tags: alexis tsipras, eurozone, greek default, greek elections
Posted in Current Events, Economics, Government & Politics | Comments Off

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