Greece has a debt that stands at 160 percent of its GDP. Its unemployment rate, meanwhile, hovers somewhere between 20 and 25 percent. European leaders want to see both of these numbers substantially slashed.
Even if Greece can get austerity cuts passed and make turn a bailout package into reality, a few larger questions looms on the horizon. Will the Eurozone recover? Can the continent handle another debt crisis? Considering the rapid pace at which government debt is rising relative to GDP in several countries – chief among them Spain, Portugal, and Ireland – it’s not inconceivable that the Greek debt crisis will quickly give way to a Spanish and Irish incarnation. Will those countries be able to successfully implement austerity measures without threatening political and social disorder? It’s a question that few European finance minister are willing to ask but one that many have probably considered.
All signs suggest that Greece is not the final roadblock in the EU’s effort to emerge from the financial turndown. It is likely that future bailouts and austerity plans are in the future for several other countries. While Greece may have shouldered most of the burden this time around, there’s little doubt that, the longer this issue persists and the more widespread it becomes, the more likely all of Europe is to descend into a period of mid-term stagnation. Furthermore, many analysts predict that large-scale austerity measures will only initiate a negative feedback loop that stifles recovery and pushes Europe further into a new recession.
In Europe, recovery and growth will both depend highly on the power of state resources. Too much austerity, and growth will be difficult to spark. Too little, and spiraling debt will only further exacerbate budgets and markets. In order to move forward, then, as a strong and unified continent, Europe needs to forge an appropriate path between the two – in Greece as well as in Spain, Portugal, and Ireland. Until that happens the global economy will continue to feel its reverberations.