Effectiveness of Greeces Political Leaders in Resolving the 2008 Economic Crisis - Essay Example

Introduction Politics can be defined as persuading the constituents on a civic as well as personal basis. Politics includes the community leaders’ organizing and controlling the actions or non-actions of the residents within the communities’ territorial jurisdiction. The political leaders’ strategies include convincing the people to implement the political leaders’ proposed views, concepts, and established laws or statutes. Politics also includes the preparation and implementation of approved laws. The research delves on the political situation of one of the Mediterranean countries. The research focuses on the political leaders’ handling of the 2008 global economic depression. Greece’s political leaders set up different options to resolve the economic crisis of 2008. Greece Geography To better understand the effectiveness of the political leaders of the Greece nation in resolving the economic crisis of 2008, the research starts with the study of Mediterranean Greece geography. Greece is strategically located in Europe’s Mediterranean environment (Budin 16). The country is composed of more than 1,000 islands. Greece is part of Southern Europe, near the Balkan sphere. The nation is bounded by Northern Bulgaria. Macedonia, Turkey, and Albania are the next door neighbors of Greece. The open Aegean sea, Ionian Sea, and the Mediterranean Sea majestically touches Greece (Budin 11). Further, the nation is composed of several mountain-type regions. The largest islands include Peloponnese (formerly Pelops), Crete and Cyprus. Several other smaller islands dot the small Greece nation (Budin 11). The smaller islands include Crete, Cyclades and Corfu. Greece has its highest internal mountain, the famed Mount Olympus. However, Greece is not composed of only mountains. The plain area parts of Greece are found in Macedonia, Thrace and Thessaly. The famous Parthenon Greece architecture is located in Greece. The godly mountain-type Acropolis is of a favorite Greek tourist attraction, aside from the Parthenon structural remains (Lusted 8). Greece Political Scene The political system of Greece is a democracy (Britton 32). The government is divided into three branches. One branch is the executive branch. Another branch is the legislative branch. A third branch is the judicial branch. Further, the government is composed of political leaders representing several departments (Britton 32). The Greece parliament is composed of elected members. The Prime Minister is the head of the government. The regularly scheduled elections allow several political parties to run for the vacant political seats. The Democratic government of Greece cropped up in 1974. The Greece Constitution requires that the President is elected from among the Parliament members. Greece is classified as a Presidential Republic. The President is elected by the Parliament members to serve a five year term. The current Prime Minister is Antonis Samaras. Furthermore, the Greece government of composed of several ministries (Britton 32). The government has a cabinet of the heads of each ministry. There are several ministries. The ministries have differently distinct functions. Greece is composed of 13 different regions. The regions contain prefectures. The regional government oversees the political leadership of each region. The Minister of Interior appoints the regional governor. The residents of the villages and municipalities elect their local political leaders (Britton 33). The Prime Minister appoints his cabinet members. The Prime Minister leads the majority party. The Prime Minister spearheads the establishment of the government policies. The people can react and petition for the resignation of the Prime Minister for espousing unpopular policies (Britton 32). The legislative government branch is made up of an estimated 300 elected members. Each of the members of Parliament has only one vote (Britton 33). The parliament is unicameral, meaning only one division. This shows that the there is no lower house as well as upper house in the legislature. In the United States, the legislative branch is composed of two divisions, the upper house and the lower house. Greece Economy Prior to the United States’ 2008 Global Economic Depression To better comprehend whether the political leaders of Greece were not effective in resolving the economic crisis of 2008, the research includes the study of Mediterranean Greece economy. Bordered by the Aagean Sea and the Mediterranean Sea, Greece has a bountiful aquatic harvest. The people of Greece can easily harvest bountiful fish and other marine food sources from the nation’s coastlines. The Greek Economy is derived from more than 75 percent service sector revenues. During 2006 alone, Greece contributed 23 percent high technology exports in relation to its imports (Petrakis 26). The Greek industries contribute less than 20 percent to the Greece economy. In 2006 alone, Greece contributed 20 percent of its medium scale industry exports in relation to its imports (Petrakis 26). The tourism sector, which includes visits to the Parthenon and other historic Greek architectural remains, is one of the nation’s revenue generators. Another source of economic cash inflow is the nation’s shipping industry. Specifically, Greece contributes ½ percent of the world’s gross domestic production. The nation generates an estimated 30 percent of the European Union’s gross domestic production. During 2007 alone, the International Monetary Fund (IMF) reported Greece contributed 0.4 percent of the world’s total exports. The nation’s per capita gross local production was $28,000 during 2007 alone. This is lower than the $32,800 per capital gross local production of the entire European Union member nations. Comparing the 2007 Greek Economy to the European Union 2007 economy, the European Union contributed a higher 16.0 percent of the world’s total exports. The nation’s per capita gross local production was estimated to be $33,000. Similarly, Greece’s 2007 exports are lower than the 2007 European Union’s 30 percent global exports (Petrakis 39). In 2007, Greece’s gross savings was 9.5 percent of Greece’s gross domestic production. However, this is lower than Spain’s gross savings representing the higher 22 percent of gross local production cropping up in the same year (Petrakis 43). Effect of United States’ 2008 Economic Depression on Greece To better relate the political leaders’ responses and the economic depression of 2008, the research delves on the effect of the 2008 economic depression on Greece (Petrakis 39). The 2008 global economic crisis started in the United States. The depression spread around the world. As expected, the United States economic crisis reached the shores of the European Union nations. As a member of the European Union, Greece was one of the hardest hit by the United States’ incoming economic depression effects. The 2008 economic crisis ballooned from the prior year’s United States housing bubble. During 2007, Greece was able to generate 4.5 percent increase in its gross local production(Petrakis 39). This is was higher than the zero percent gross local production growth in other European Union nations’ economies. The Greece government of Nea Demokratia under Kosta Karamanlis had implemented cushioning economic policies. The policies were temporarily able to prevent incoming economic depression from crashing the favorable Greece economy. During 2008, the political leaders of Greece instituted economic policies that retained the low unemployment rates, € 23 billion bank deposit and lending transactions. When 2009 set in, the political leaders of Greece were not able to prevent the encroaching global economic depression from reversing the prior years’ economic bliss (Novotny 237). 2009 resulted to an economically depressed Greece. The government’s public debt skyrocketed to bankruptcy levels. Similarly, the nation’s fiscal deficit climbed to near bankruptcy status. Consequently, Greece Prime Minister Karamanlis sought public approval of his proposed economic rehabilitation programs. Further, Prime Minister proposed during the 2009 elections that emergency austerity economic measures should be immediately approved by the general public (Novotny 237). Prime Minister Karamanlis proposed to austerity measures in order to prevent the economic depression having a more depressive economic effect on the Greek population, as done by the Karamanlis government during the 2008 fiscal year. On the other hand, the opposing election contender, The opposing PASOK party’s George Papandreou, proposed the government will spend more money stating that the government is selfish enough to relegate the funds to a selected few entities and individuals. As expected, the people elected Papandreou to replace the current Prime Minister Karamanlis. New Greece Government Leaders’ reaction to the Economic Depression The new George Papandreou government won the October 2009 elections (Novotny 237). Consequently, the new Papandreou government did not institute any economic austerity measures needed to fight the incoming economic depression. Instead, the Papandreou government decided to implement its campaign promise to distance itself from the Karamanlis government’s unpopular tight budgetary measures. For the next six months, the Papandreou government lost time when it did not impose the necessary economic measures. In 2010, the Greek nation dropped farther into deeper economic depression. Consequently, the interest rates on Greek bonds rose unfavorably (Novotny 237). Because of the high borrowing interest rates, the Greek companies and the government found it doubly hard to seek loans. The high interest rates were imposed because the creditors or lenders feared that the bankruptcy- going Greek government and entities may not be able to pay their loans on time. The Papandreou Government was now in very deep debt. To improve the nation’s credit status, the Papandreou government was forced to sign an agreement with the creditors (Novotny 237). The creditors required the Greek government leaders to sign an agreement with the European Union, International Monetary Fund, and European Central Bank. After signing the agreements, Greece’s Papandreou government complied with its agreement to implement austerity measures. It is better late than never to resolve the economic crisis. Further, the Papandreou government’s austerity measures involved several actions. The government was forced to reduce its spending to allowable levels (Novotny 237). Next, the government was forced to increase the tax collection efforts. The same government leaders implemented labor reforms. In similar fashion, the Papandreou government was forced to roll out the required economically viable pension reforms. After signing the agreements, the Papandreou government was given € 110 billion bailout loan. The loan was earmarked to pay the current Greece creditors. After receiving the loan amount, the Papandreou government did not comply with the loan agreements (Novotny 238). The government did not want to break its promise to the Greek people during the election period. The Papandreou government did not question or appeal the loan contract provisions presented by the International Monetary Fund, European Central Bank, and the European Union. Further, the Papandreou government implemented painful horizontal wage cuts. The salaries of the lowly paid government employees were significantly reduced. Likewise, the pensioners’ received low salary payments. The government did not prioritize saving money for more important or necessary projects. The government did not allocate enough savings to help the weak and poor sectors of Greece society. Furthermore, the Papandreou government refused to implement the necessary economic development policies (Novotny 238). To generate more government funds, the Papandreou government raised the tax rates. The Greece-domiciled companies were forced to pay higher tax rates to help pay the government’s expenses. Specifically, the Papandreou government raised the value added tax from 21 percent to the higher 23 percent. The economic depression creates a picture where the Papandreou government could not easily find investment sources. The investments were needed to boost the economic development of Greece. Consequently, the Greek government leaders were awakened to an inescapable world filled with a vicious economic depression cycles. The Greek economy continued on a steep inescapable downward slide. After receiving the huge loan amount, the Papandreou government firmly refused to implement the austerity requirements of the lending entities (Novotny 238). The government’s socialist policies clearly opposed the proposed economic austerity measures. The Papandreou government did not implement the privatization measures that were included in the loan agreements. Instead, the government leaders used the funds to help their close friends, political supporters and relatives. Helping included getting jobs and business dealings for their close relatives, political supporters and friends. Because of the Papandreou government’s political failure to resolve the economic depression, George Papandreou was forced to resign during November of 2011 (Novotny 238). Prime Minister Papandreou correctly submitted his resignation letter after realizing that his current avoidance of the required austerity measures caused Greece’s further decline into the economic depression pit. After Papandreou’s resignation, the new government was led by Lucas Papademos. The new 2011 government was a conglomeration of three of Greece’s political parties. The political parties are the former Prime Minister Karamanlis’ Nea Democratia Political Party, George Papandreou’s PASOK political party, and the smaller right-leaning Popular Orthodox Rally (LAOS) political party. Further, the new Prime Minister Papademos political party sought an additional € 130 billion loan from the creditors. The loan was approved and released during February of 2012. Consequently, many of Greece’s private creditors decided to forgive and forget many of Greece’s debts (Novotny 238). The new Papademos government harnessed the economic minds of the Nea Demokratia political party, PASOK political party, and the Democratic Left party. The three parties formed a new coalition party to help the Papademos government bail out from the current economic debacle created by the prior George Papandreou government to form the Samaras government (Novotny 238). The Papademos political strategy to apply for a loan is a good political strategy. The money will be used to repair the economic debacle left behind by the prior Prime Minister Papandreou. Furthermore, the failed Greece economy is firmly grounded on the political stature of the government leaders. The government leaders are not democratically minded. The root cause of the Greek economic crisis is erroneous political leadership. The political leader, George Papandreou, did not seriously take the economic principles in his political leadership (Novotny 238). Moreover, the Statism politics of George Papandreou led to the bankruptcy of Greece. The politics was tainted with graft and corruption strategies. The Papandreou government used government funds to repay political supporters, friends, and relatives. Greece’s failed Europeanism polities focused on serving the few members of society. Likewise, the populism concept characterized by the presence of interest groups and syndicates hindered the political leaders’ implementation of the right economic policies. Another factor that contributed to the failed Greece economy was the unstable political regime of Papandreou (Novotny 238). Further, Tom Geoghegan reported that Greece may quality as the country having the longest economic depression in history (Geoghegan 1). The government leaders expected 2013 to be another economic depression year. This was the dire prediction of Greece Shadow Finance Minister Notis Mitarakis. When this happens, Greece will be the first country to have 6 consecutive years of economic depression, outdoing the United States economic depression of the earlier years. As proof, 2013 passed with Greece still under the grips of the economic depression pit. Furthermore, John Kolesidis reported that Greece was in a great depression during 2012 (Kolesidis 1) Greece Prime Minister Antonis Samaras admitted this statement to visiting United States President Bill Clinton. The statement was done in a two day Athens Greece meeting of the nation’s creditors or lenders. The meeting was held to generate additional loan help from other countries. The Greece government held the meeting to postpone debt payments and prevent loan payment defaults. Similarly, Prime Minister Samaras correctly applied for more loans in order to remedy the economic depression that the Prime Minister inherited from the prior Prime Minister. Moreover, the economic picture as of this news report was that Greece’s gross local productionhas declined further starting from 2008 (Kolesidis 1). The higher taxes led to the reduced production. Likewise, the government leaders’ spending reduction triggered the lessened outputs. In the same manner, the political leaders’ implementation of salary reduction programs generated the lower production outputs. The political leaders of Greece correctly implemented the higher taxes, lower salary rates, and spending reductions to comply with the loan bailout agreements. Further, the effects of the bailout loans are favorably significant to the Greece political leaders and the constituents (Kolesidis 1). Greece generated the 9.3 percent budget deficit of the nation’s 2013 gross domestic production. The loan agreements require the Greece government leaders to reduce the 2013 budget deficit to the significantly lower 3 percent budget deficit of the Greece nation’s 2014 gross domestic production. The loan bailout agreements require the current Greece government leaders to implement a huge € 12 billion reduction during 2014. Further, the loan agreements led to the 23 percent first quarter unemployment rate. Similarly, the loan agreements require additional taxes to be collected during 2014. As the term states, the loans are meant to bail out Greece from its current economic depression. The money will be use do pump more economic activity into the Greece environment. Wrong Political Leadership According to Lanny Hobson, Greece’s political leaders chose the more expensive way to resolve its economic crisis (Hobson 1). When the Papandreou government policies failed to resolve the economic depression of 2010, the government debt ballooned to € 300 billion. Hobson insisted that the best way to resolve the 2010 economic crisis was ask its private creditors for write downs (reductions) of their debt, condoning or ‘forgive and forget’ of their maturing debts. Under this debt strategy, the private creditors may be forced to accept the bankruptcy of Greece and forced to forget Greece’s debt amounts. Consequently, the private debtors will lose a portion or all of their principal money loaned to the Greece government as well as their interest payment gains. However, Hobson further insisted that the political leaders of Greece decided to implement the European Union –backed bail out loans (Hobson 1). The loans included excessive loan interest rates. The high interest rates literally pushed the Greece economy deeper into the quagmire of economic depression. The European Union gained from the spearheading additional loans granted to Greece. Further, Hobson observed that the Greece economy dropped deeper into debts. In 2012 alone, the € 300 billion debt rose further to € 370 billion (Hobson 1). Only the estimated € 199 billion debts were held by the private creditors. The European Union sponsored debts were used to pay for the matured old debts. Consequently, the private creditors of the old debts were able to get back their principal amounts loaned to Greece as well able to get their interest payment gains. Analyzing, Hobson is completely correct (Hobson 1). By filing for bankruptcy, the Greece government can seek forgiveness (cancellation) of its unpaid debts. The private creditors may have no other recourse except to grant Greece’s request for the private creditors. Likewise, the private creditors may be forced to extend the loan payment dates to allow Greece more time to pay its currently matured loan amounts. The private creditors may be forced to adhere to Greece’s request for lower loan interest rates due to Greece’s economic bankruptcy. Finally, the private creditors may have no other option except to stop collecting the current loan as well as loan interest amounts from Greece. Further, Fox News emphasized in its August 2013 report that is well on the way to recovering from the debilitating economic depression (AssociatedPress 1). The reports stating the rest of the European Union member states had already escaped from the United States 2008-triggered global economic recession. However, Greece remains within the bosom of the Economic depression. A grim forecasts shows that Greece will produce a more favorable economic picture in 2014. However, it will take several more years for Greece to reach its pre-2008 favorable economic levels. Furthermore, one February 2014 report reiterates Greece’s political leaders are still struggling to bring back luster into the economically depressed Greece economy (Baetz 1). To resolve this issue, the European Union leaders are delving on the possibility of granting Greece more loans. Dutch Finance Minister Jeroen Dijsselbloem will be holding the meeting of the European Union ministers. The meeting will decide whether Greece was able to comply with the loan requirements needed for the approval of the next batch of loan amounts. The ministers agreed that one of the requirements is for Greece to reduce its current outstanding debts. Further, the current outstanding debt of Greece stands at € 240 billion (Baetz 1). The European Union’s new bail out loans will be used by Greece to pay its currently maturing outstanding debts. One possible bailout being proposed is for Greece to pay some of its maturing debts in exchange for extending the payment period of the other outstanding debt amounts. This proposal includes reducing the outstanding debts’ interest payment amounts. As of 2014, Greece is still struggling with its economic depression, which started in 2008 (Baetz 1). In terms of curtailing its current economic debacle, Olli Rehn, an economic officer of the European Union, observed that Greece still has a lot of hard work ahead. Likewise, Rehn insists that Greece still has a very high 28 percent rate of unemployment. Likewise, the loan creditors unfavorably see the current loan debt total’s representing more than 170 percent of Greece’s gross local productionas to high. Further, one of the austerity measures is the drastic reduction of the government employees’ salaries (Baetz 1). Consequently, the government employees went on strike to protest. The protest included stopping the shutdown of some government departments or agencies. The shutdowns allowed the government leaders to save on the employees’ salaries. Finally, the Greece government leaders’ shutdown of government services complied with the loan creditors’ requirements (Baetz 1). The requirements included imposing austerity measures. The austerity measures included reducing unnecessary expenses. By shutting down the redundant government facilities, the government was able to reduce the salaries paid to the government employees. This action appeals to the creditors. With the saved salaries, the government has more money to pay its maturing loan amounts. Conclusion Based on the above discussion, politics includes convincing the residents to implement established government policies, statutes, and laws. The above discussion shows different political leaders offer different political responses to the 2008 economic depression. Greece Prime Minister Karamanlis prioritized the implementation of austerity-based political strategies to resolve the 2008 economic depression. The 2009 Prime Minister George Papandreou government refused to institute any economic austerity measures. The refusal firmly led to Greece’s further decline into economic depression. Consequently, Prime Minister submitted his forced resignation to let a more effective Prime Minister resolve the Papandreou-aggravated 2009 economic depression. Next, new Prime Minister Papademos spearheaded the approved additional € 130 billion loan from the creditors to bring Greece out of its 2012 economic depression. Prime Minister Antonis Samaras invited the global loan entities to grant the Greece government’s loan applications. The above discussion clearly shows Greece’s political leaders delivered different strategies to resolve Greece’s economic depression. One of the strategies is using force on the constituents to ensure the austerity measures are strictly obeyed, including department shutdowns. Evidently, the political leaders of Greece imparted different political strategies to effectively resolve the economic crisis of 2008. Works Cited Associated Press. "Greece, Others Still Sruggling with Unemployment, Debt Despite end to Eurozone Recession." Fox News 14 August 2013: 1. Print. Baetz, Juergen. "More Aid for Greece to Be Decided 'After Summer'." Associated Press 17 February 2014: 1. Print. Britton, Tamara. Greece. 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