Greek Economic Plan in 2012

Greece will not have to adopt new austerity measures in 2012 if the reforms that have been approved are to be implemented, says the Finance minister of Greece, Evangelos Venizelos. In 2012, the new Executive of Lukás Papadimos´ coalition government foresees a public deficit of 5.4% of the GDP if the agreements of October are implemented, including the debt relief of 50% of public debt of the country. The budget anticipates, in 2012, a fiscal gap of around 6.7% compared to the 9% with which Greece is expected to end this year.

A deficit reduction will be made even though the country is expected to suffer a recession stronger than anticipated, with the GDP expected to fall by 2.8% in 2012 instead of the 2.5% that has been measured in 2011. According to the Greek Executive, these forecasts are correct, thanks to ambitious austerity plans and cuts adopted in public spending.

First of all, it is understood that the new Greek economy minister says Greece will not have to implement further austerity measures, as those implemented before were too strong and traumatic for a developed society, thus also were needed. These measures included: a reduction of the salary of civil servants by 25%; an increase of two years in the retirement age; an increase of VAT; or a new tax on real estate.

On the one hand, it is interesting to note that Greece will see the colossal public deficit that it holds reduced entirely by the help of the EU, whose terms stipulate that the Greece´s repayment to the EU will only be half of the initial debt. Without this debt relief Greece would not keep going. However, on the other hand, a country should not have to be bailed out of its own financial crisis for having dug too deep into its pockets, only to be bailed out by its neighbours. It is not that I do not support the bailout, otherwise Greece bankruptcy could create a domino effect on the rest of Europe, but my question is: So is this the way in which we should award a country, which lied and falsified its macroeconomic data? Would not it be better to defer the debt over a decade?

There are several questions that need to be asked about Greece´s financial conduct as Greece now calls on the ECB to help the euro zone to overcome the crisis. In my opinion, the crisis should be solved with good economic management, the liberalization of the labour market and the implementation tax measures to help SMEs.

Finally, I think that the blame for this great recession in Greece does not come only from the Greek government, but also from the European Union because it let Greece to join the organization when it did not fulfill the requirements.