The U.S. has historically been the most significant contributor to foreign aid and international institutions like the United Nations and the International Monetary Fund. However, as the current recession has put some strain on international economic stability and the availability of funds for foreign aid, fewer countries can look to the U.S. for monetary assistance. This is particularly relevant to struggling European nations, including Spain, Ireland, Portugal and Greece, all of which are experiencing deep economic recessions and some of the highest rates of unemployment. As a Greek-American it has been disheartening to observe the slow economic recovery in the U.S. and a near collapse of the economy in Greece, the two countries that define my background.
Almost a year since Greece accepted a 110-billion euro loan from the EU and IMF to avoid bankruptcy, the conditionality of the loan and the ineffectiveness of the government has hindered progress. Considering the lack of progress so far, the Greek government now needs to focus on implementing pro-development policies and gaining public support for legislative overhaul. The current prime minister of Greece, George Papandreou, who has close ties to the U.S. and whose father was an honorary professor at Northwestern University in 1950, has yet to implement pro-development policies under the restrictive conditionality of the IMF loan.
For Greece, the austere measures and structural reform of the IMF loan, coupled with an inept government have resulted in unemployment, multiple labor strikes, ballooning debt, and limited potential for growth. Contract workers and state employees have repeatedly occupied the City Hall in Athens, to protest the cuts in government spending and government sponsored jobs.
The U.S. usually plays a major role in monitoring IMF conditionality because it is one of the leading lenders, but this time around Greece’s loan is also funded by the EU, which means the future of Greece’s economy depends on Germany’s mercy. Under the conditions of the loan, Greece has been forced to accept austere tax reform, limits on public sector jobs, wage and unemployment benefits reduction, spending limits and the implementation of new taxes.
In a country where a large portion of the population is employed by the state, private businesses face hurdles to develop, and the government has been ruthlessly spending or pocketing public funds, these measures will only cause further dependency on foreign loans, and reduce the potential for recovery.
The Greek government should focus on rebuilding sectors which lack support. First, the government must reform its legislation, become more transparent in its intentions and reduce loopholes that allow for the mismanagement of state funds and corrupt government practices.
Second, the government should provide incentives for private businesses to grow, which would help reduce dependency on state benefits by promoting job growth in the private sector. It would also boost investor confidence and increase the tax base if private businesses expand into larger corporations. Finally, in a country where tourism supports more than 15 percent of the GDP and 16 percent of the job sector, the government should clean up their act, literally, and do their best to attract tourists year round. While such measures can take time to implement, successful political and economic recovery will require unified support from the public and the government. I’m hoping by the summer Greece will have learned its lesson because if they don’t act quickly they will soon fall behind indefinitely.
Vasiliki Mitrakos is a Weinberg sophomore. She can be reached at [email protected]
