Greece Gives Tsipras a Second Chance
Friday, September 25th, 2015September 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)
