What was the background to the Greek Debt Crisis?
The Greek debt crisis in the 2010s led to increasing poverty. Greece had built up significant government debt ahead of the global financial crisis of 2008. This was worsened by the crisis, as many banks were in financial difficulty, and the Greek government took on the debts of these banks. This, along with responding to the direct impacts of the global financial crisis, rapidly increased government debts.
Significant lenders to the Greek government included banks in Germany, France and the UK. To stop Greece defaulting on these debts, and further worsening the finances of such banks, the IMF and EU lent more money. This kept the debts being paid, but the IMF and EU insisted that the Greek government cut public spending and increase taxes.
In 2012 a limited amount of debt relief was agreed in debts owed to private banks, though by that stage much of the debt had been transferred from banks to the IMF and EU. Furthermore, debts governed by English law were paid in full, after the UK government refused to change the law to enable such debts tobe included in the debt relief scheme. Vulture funds in particular bought up these debts, and made mass profit as a result.
What was the impact of the Greek Financial Crisis?
The crisis was a disaster for people in Greece. Unemployment trebled from 8% of workers to 27%. By 2013 over one-in-five people lived in “severe material deprivation”.
Why is the Greek Debt Crisis still relevant?
The crisis shows that international debt can cause problems for people in any country. The IMF and EU pushed the same response – austerity rather than debt cancellation – on a fellow European country as they have on countries in Africa, Asia and Latin America.
Debt Justice requires a different approach to debt, which recognises that creditors are also responsible for debt crises. And requires creditors to cancel debts when paying the debt would cause increasing poverty.