The Greek Parliament’s approval of fresh austerity measures in the early hours of Monday is crucial to the country’s financial survival but it may still not be enough to secure bailout money from fellow eurozone countries.
The austerity measures are a needed sour medicine
Last week, eurozone finance ministers delayed approval of a second bailout package worth €130 billion insisting that the Greeks adhere to previous commitments and that all political parties sign up to the deal.
With Greece heading for elections in April, eurozone finance ministers want a clear commitment that whoever wins will implement the austerity measures, sources told The Times yesterday.
Finance Minister Tonio Fenech said he had nothing to add to his statement on Friday when contacted yesterday.
Mr Fenech had warned Greece that it would get no more money from Malta unless the government was convinced the aid was being used to carry out painful but necessary market reforms.
It was a sentiment shared by other eurozone finance ministers.
But sources said that, although the Greek Parliament’s approval was an important hurdle to overcome, the government, like other eurozone governments, was still waiting for a commitment from all Greek political parties to respect the decision.
Eurozone finance ministers are expected to sign off on the bailout money tomorrow as concern over social unrest in Greece grows.
Labour finance spokesman Karmenu Vella believes the EU has been putting too much emphasis on the financial aspect of the Greek problem with little effort on the economic side.
Financial aid is important and necessary but so is stimulating growth, he believes. “When a doctor administers medicine it also helps to prescribe vitamins and this is what Greece needs because the only lasting solution will come from economic growth.”
The reaction from ordinary Greeks to the austerity package has been explosive but the Greek Parliament had no choice but to approve the measures, according to economist Karmenu Farrugia.
The alternative, which would see Greece leave the euro and undergo a disorderly default, was “a far worse” option, he said.
Mr Farrugia likened the situation in Greece to that of a very sick patient, administered a heavy dose of medicine that could create negative side effects at first. “The medicine is likely to start working after some time.”
Austerity measures will hurt growth inthe short term, he added, but they were necessary to bring back financial stability that would keep Greece anchored in the eurozone.
“This will attract foreign investors, a key component to stimulate economic growth that will lift the Greeks out of their misery.”
But Mr Farrugia insisted that Greece had to do much more to regain the trust of its eurozone financial backers after it failed to implement all the agreed austerity measures from the first bailout programme in 2010.
And as Greece tries to regain the trust of fellow eurozone members, the EU as a bloc must also win back the trust of the financial markets, according to economist Stephanie Cutajar.
It was for this reason, she added, that Europe needed to act as one and show its determination to help individual member states.
If Greece defaulted, the eventual collapse of the country would have disastrous effects that risked spreading to other European countries.
However, restoring trust alone would not solve Greece’s problems, she insisted, as the country today “embodies the dangers of economic procrastination and lack of courage to implement reforms”.
“Greece is now at a point of no return whereby the reforms that have to be implemented are significant and harsh. But there is no running away or easy way out and unfortunately the austerity measures are a needed sour medicine,” Ms Cutajar said, adding that further protests wouild not solve the problem but will only make it worse.
This Greek tragedy was a reminder, she added, that the age of overspending and nonchalance for escalating deficits and debts was over.
ksansone@timesofmalta.com