Austerity is not the answer to fixing Greece problems. After all, we’ve notice what austerity does to an economy, examples right here in the Caribbean. Moreover, austerity has a proclivity to always go hand in hand with politically motivated violence and social instability.
Resulting, in civil unrest, a potential civil, coup attempts and even regime change. For example, “Germany’s hyperinflation in 1923 was the initial catalyst that contributed to Hitler’s rise to power, but the deflationary effect of the Great Depression (U.S. banks called in their German loans after the 1929 stock market crash) and government austerity measures in the early 1930s caused an “ugly deleveraging” in the Weimar Republic (and was the end game)
Thus, If a country (in this case Grace) implement austerity measures upon an already weaken economy can potentially result in something more than a simply financial crisis. Remember, Greece anti-austerity movements in 2010. In addition, the potential exit of Greece from the eurozone monetary union, primarily for Greece to deal with its increasingly unmanageable public debt (Grexit).
So, more austerity measures will pretty much be putting the Greek economy in a “choke-hold” which they simply would not be able to get out of. However, the problem with loosening Greece knots even more is due to the phobia of them repeating the same mistakes prior to the bailouts, during the first bailout ($110 Billion) and the second bailout ($130 Billion).
Greece problems are in party by, Greece lavish spending on the military, health and other social benefits amidst embedded corruption. Moreover, the hosting of the Summer Olympics Games in Athens ($11 Billion), while tax evasion flourish, but, tax enforcement didn’t. Most importantly, Greek politicians have been underestimating the country debt for years. Now if you are looking at Greece from outside the Eurozone it plays for good politics to call for Greece debt to be forgiven either by half or in whole, but, also bad politics if you are looking in from the Eurozone “Moral Hazard”.
Now forgiving Greece would be difficult amidst “inter allia”; they currently do not have a strong export-oriented economy, no real market reforms envisage growth within a reasonable timeline, embedded corruption remains, no real tax enforcement policy. Also, it is important to note that fixing Greece financial crisis is a bit of a “thorn”. Greece monetary policies are controlled by the European Central Bank, but, their fiscal policies is mostly control by the Greek government and Greece like I mentioned in previous paragraph, has been understating their debt for quite some time. Greece understating their actual debts can be trace all the way back to the 1990s. In which, Greek politicians have been reporting the debt lower than the actual debt (Greece along with other Eurozone country must keep their debt at 3%).
Greece also depends on Tourism and shipping, two of its biggest industry which don’t really do well in a global recession (2008 global financial crisis). Now normally in a situation like what Greece is currently in “25% unemployment, shrinking economy, liquidity crisis” a country would simply print more money, but, Greece can’t because they are a part of the Eurozone (remember what I said about monetary policy). Thus, Greece needs more capital that’s for sure and an extension on their current debt payments, but, it must come with stringent monitoring policies (not austerity) perhaps a committee specially task to advice and monitor the economy until its back at a sustainable level.