The Implementation of Austerity Measures in Greece - Essay Example

A Causal Argument Currently many economies are grappling with debt problems that have paralyzed virtually about all sectors in thecountries. Greece for example has been hit by the worst dept crisis in history and this has caused major riots where citizens are feeling the hardships and difficulties of living in an economy that is starved and grappling with the problem of huge debits from financiers. This has brought about the issue of austerity measures in trying to solve the problems that have been brought about by large debt burden in the economy. Firstly, we have to understand what austerity measures are. Austerity measures are steps that are taken to reduce government spending and induce more funding for development projects. These include cutting employment budgets, streamlining important sectors such as reducing funding of the health centers to allow people to pay for such services directly, and the overall reduction of government spending on recurrent expenditures and concentrate the same on development expenditure aimed at stimulating the economic development. Currently, there are divided views concerning implementation of austerity measures. There are some analysts who view implementation of austerity measures as the best way through which economic depressions can be solved. The IMF and World Bank are some of those who advocate for austerity measures in such economies (Chiranga, 1).On the other hand, there are those who vehemently oppose any decision regarding implementing of the austerity measures in these economies, and these include social groups and employee rights activists. It would be important to understand the effects of austerity measures in an economy to better make an informed decision regarding the austerity measures. These measures lead to government cut on spending in the sectors mentioned above, and this may lead to increased unemployment. Economic depression also results when the spending by individuals and private sector has depreciated meaning that cash for development and goods consumption in the market gradually decreases. Currently Greece has been grappling with a serious economic depression that resulted to massive demonstrations in the country. Greece has been living beyond its means even before joining the Euro, and the huge debt that has accumulated has resulted to a serious economic strain (BBC News, 2011). The Greek government after joining the Euro adopted a lavish life where the government went on a spending spree and borrowed heavily from the financial lenders (BBC News, 2011). The public spending was on it highest peak and wages doubled in the past one decade. This resulted to more than 340bn Euros in debts for a country that has about 11 million people (BBC News). Tax evasion was remarkable in the country as more money flowed from the government’s coffers. The result has been serious demonstrations as people feel the credit crunch, with more than 30,000 jobs expected to be lost (CNN Wire, 2011). To solve this problem it would be better to stimulate the economic growth though encouraging innovations and stimulate new life in the industries. This will encourage public spending and more exports that would earn massive levels of income for the country. Piece meal economic control on government spending might be wisely implemented in the unnecessary expenditure and leave the most important economic expenditure, but without touching job losses and essential services such as healthcare, employment and education. This would on the other hand invite private investors in the economy who would deliver more innovations and stimulate the economic growth. However, there are those advocating for austerity measures in the above case. Many modern mainstream macroeconomist argue that reduced government spending would induce more spending in the private sector to consume more and support the economic growth of the economy (Chiranga, 2). This belief is derived from the perception that existence, which is predicator of the economic fluctuations revert back towards the normal state of matters in an automatic way. Austerity measures are also thought to helping governments in clearing accruing debts that have been accumulated for a long time. Austerity measures also aid in inviting other financiers and economic superpowers in helping to bail out the economy from the credit crisis. However, there are serious repercussions that are associated with this approach. The Greece parliament for example advocated of the austerity measures and even passed a resolution job cuts that will have more than 30,000 employees losing their (CNN Wire, 2011). There are massive problems that would be created through austerity measures as advocated by many parties including the Greece government, the World Bank and the IMF (Chiranga, 1). Massive unemployment cases where government spending has to be reduced are the most evident ones and this might lead many people to poverty. This will also reduce public spending and has significant effects to the economy of a country. The country has to thrive on growing industries and these industries are supported by the local population in a country. Affecting the job cuts would mean that the government has reduced the purchasing power of a significant percentage of buyers. This will result to reduce spending in purchasing products, which will in turn result to reduced industrial growth in the country. These industries are the same industries that are better placed to bail out the economy from recession. The GDP growth in the country will be badly affected in case the austerity measures are adopted due to reduced production (Chiranga, 2). The government especially in Greece case has opted to offering handouts to people who have already lost their jobs, and this is ironical since the same amount of money could have been used to stimulate the economy through stimulated industrial growth. There will be more social unrests as is happening in Greece where people will be out to air their frustrations of being faced with harsh economic conditions, and this will result to massive damage of property in demonstrations. This has already happened in many towns and millions of Euros have been destroyed (CNN Wire, 2010). These demonstrations and the volatility in the country on the other hand would lead potential investors to flee the economy, which would lead to more economic bottlenecks, job losses and reduced economic growth. Judging from the current case in Greece, the government should have instituted measures to encourage innovations, local industrial growth and inviting investors rather than opting to austerity measures. Austerity measures are therefore hurting to the overall economy. The innovations and industrial developments would lead to more consumption in the economy; increased exports and these would make the economy to regain its strength on the long run. In most cases, it would not be possible and sensible to create a larger problem in solving another problem and this makes the use of austerity measures amount to using a problem to solve a problem,. The result would certainly be a larger problem like the one being witnessed currently. Work cited CNN Wire. Greek lawmakers pass new austerity law despite unrests. CNN iReport, 2011, Oct. 20. http://edition.cnn.com/2011/10/20/business/greece-austerity-strikes/index.html 18 Nov. 2011 Chiranga, Ngonidzashe. Won’t Austerity measures magnify economic decline? International Research Journal of Management and Business Studies 1.1 (2011); 001-003 BBC News. Q&A: Greek debt crisis. BBC News Business. 2011, Nov. 10 http://www.bbc.co.uk/news/business-13798000 18 Nov. 2011. Read More