The situation In Athens is becoming ever more critical. The deal to restructure Greece’s debt is hanging on by its fingernails as the government under Prime Minister Lucas Papademos struggles to convince the lawmakers and the general public that EU imposed austerity is the best option for staving off a default. Previous measures taken by Greece in exchange for rescue funds have cost it much of its economic prosperity, as unemployment continues to rise and opportunities for growth are hedged by increased layoffs in the public and private sector. With the latest rescue package demanding further cuts and outright layoffs, time is short for Papademos as seeds of dissent begin to find accommodating soil, leaving some to question if the relief package is enough to aid the nation’s ailing economy. Whether from its lateness or intent, it’s more than clear that the $170 billion relief package will not be enough to play a significant role in fostering a Greek recovery, as the required austerity measures will all but eliminate opportunities for economic growth.
The focal point here is the further recession of the economy through increased unemployment, for as it stands, the debt deal forces the government to enact legislation that increases the jobless pool via a combination of layoffs and wage restrictions. The Greeks are expected to eliminate 150,000 government positions by 2015, amounting to 50,000 jobs lost per year over three years which adds directly to the unemployed tally. On the flip side, the deal calls for either a 22 or 30 percent reduction in the minimum wage for employed persons (depending on age) and caps on private sector salaries until unemployment is at or below 10 percent. Wage cuts under these conditions augment unemployment because those seeking jobs remain out of work as minimum wage workers are more likely to retain their current positions. In addition, salary caps in the private sector discourage advancement, leaving entry and mid level posts occupied; not to mention the increased difficulty of attracting new hires through competitive pay. So the result is the job seekers continue without work; the employed will remain in their posts despite reduced pay, alleviating the need for businesses to hire additional labor, which results in increased jobless numbers.
Without greater funding or a retooling of the austerity requirements, the $170 billion package will only serve to delay Greece’s default, and do nothing to take the issue from the table. With nearly one fifth of the available labor without work, further austerity will only worsen living conditions, while making it more difficult for Greek businesses to remain efficient and competitive. At some point, Greece will need to pay its debts, and European leadership must avoid its default, but the Greeks will need a way to be profitable again and the ECB, IMF and EUC need to give it a way to do that. After all you don’t break a face to save a nosePowered by Sidelines