The financial markets around the world have been closely watching developments in Greece for any sign that the government is taking the necessary steps to deal with their budget woes. Today the Greek parliament passed a budget that includes severe austerity measures, which is being well-received by the global financial markets but not so much by the Greek people. After passing a bill that will help Greece to secure a bailout package from the European Union and the International Monetary Fund, the government then turned its attention to rioters, who set fire to buildings in Athens and threw gasoline bombs at police in response to the measures included in the budget.
The new budget opens the way for Greece to receive approximately $170 billion in aid from the international community ensuring that it won’t default on its debt obligations, which would’ve undermined financial markets around the world. However critics of the plan warn that the budget cuts, which included a severe reduction in minimum wage and the elimination of 20% of government jobs, will cast the Greek economy into a further downward spiral and condemn them to economic collapse in the years to come.
The riots in Greece are the worse that this country has seen since the financial crisis gripping their economy was first discovered just after 2009. Journalists say that at least 100,000 protesters gathered in Athens and set fire to 45 buildings in the capital city. Police tried to push the rioting crowds back away from government buildings but the protesters greeted the police with a line of gas bombs as they tried to hold their ground.
Both police and protesters were injured and hospitalized while violent protests also broke out in other parts of the country with other government buildings being set ablaze by angry protesters.
Greek PM Lucas Papedemos urged members of Parliament to back the austerity measures in the budget plan saying that failing to pass the bill would ensure that Greece would default on its debt and would be cast out of the euro. However, while the budget did pass, 43 ministers from both parties did not support the bill and therefore were expelled by their respective political factions.
In order for Greek to receive the additional bailout money, the international financial community made it quite clear that unless the government did something to close the holes in the budget the money would not be approved. The austerity measures called for by the international lenders will cut even further into a Greek economy that is reeling from high unemployment, higher taxes, and dim prospects going forward. Greece has been under heavy pressure to get its act together, particularly from Germany, which is the strongest economy in the EU and is one of the few countries in a position to lecture to the Greeks about their economy.
Things have always been a little dicey when it comes to the Greek economy. Even the way in which they first got into the euro seemed to be more smoke and mirrors than a healthy balance sheet. It is a shame that this has led to such violence but it always seems to be the case. It might not be long until we see similar events here in the U.S.