Eurozone finance ministers recently approved Greece’s plan meant to ease the hardships created by its international bailout, extending that loan program by four more months. Greece had to repay its loan by February 28th.
Change in Plan:
In revising the terms of the bailout program, the new Greek government pledged to take a disciplined approach to budgets, spending and tax collection, while remaining committed to relieving the “humanitarian crisis” caused by years of economic hardship and high unemployment.
- The New Greek government was committed to anti austerity measures and greater public spending. And this would have amounted to breaking the contract with the lenders who had lent money to Greece under financial bailout loan package (Macro Adjustment Programme) during the crisis. Hence, members of the European Union were opposing this move of Greece.
- Under the Macro Adjustment Programme, Greece had to compulsorily implement the following programs:
- Fiscal reforms to generate savings, that is, austerity.
- Structural reforms to enhance competitiveness and growth, such as privatisation of public assets and
deregulation of markets including the labour market, that is, labour market flexibility.
- Financial reforms to enhance financial stability, such as banking regulations, and bank recapitalisation and
- Since its inception, the new government had also been asking for debt write-off.
Sources: The Hindu, EPW.