Greece in the throes of debt

7 March 2012
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A hundred thousand Greeks clashed with police and marched towards the parliament building in Athens to oppose a new round of budget cuts on social services and impending mass layoffs.

In February, the "troika" (European Commission, International Monetary Funds and European Central Bank) imposed another deadline on the Greek government to slash its budget for social services and adopt more austerity measures. In exchange for this is a 130 billion euro bailout fund that the Greek government has been requesting from the European Council (EC).

The "troika" wants a reduction of up to 325 million euros from the budget. Among the items slated for reduction are funds intended for health services and benefits enjoyed by Greek workers that already suffered cuts last year. Pensions will also be slashed by 35%. Greece is a welfare state where the government pays for all of the people's health, education and pension needs. These measures will condemn millions of Greeks to severe poverty.

Aside from widespread and massive cuts in social services and benefits, the minimum wage will also suffer a 22% reduction, resulting in a fall of up to 44% in real wages. Once this is in force, workers will be receiving only about 600 euros from the previous 1,800 euros. There will also be a new set of restrictions on union negotiations even as the government is poised to terminate more than 150,000 of its employees. These conditions have been called one of the "most violent systematic attacks by capitalism" on organized labor in the country's history.

Like the first one, this second bailout is meant to ensure that the Greek government is able to pay off its debts to creditor banks and institutions at the EC without fail. In fact, one of the conditions imposed by the "troika" is for an EC official to enter the Greek bureaucracy to directly manage the fund. The official will ensure that Greece spends the bailout money to pay its debts and complies with the "troika's" other conditions.

The Greek economy entered into a recession in 2008. Production plummeted by 8% and unemployment soared from 7% to 21% in merely three years. To cover up the crisis, the Greek government resorted to massive borrowing. The country's indebtedness ballooned annually and by 2010, the country owed an amount equivalent to 121% of its Gross Domestic Product. In May 2010, the "troika" lent the Greek government 110 billion euros to keep the economy afloat and bail out bankrupt banks and institutions.