The newspaper article “Greeks Find Mere Austerity Won’t Do” by Bensasson details the austerity measures that have been taken by the Greek government to help reduce its budget deficit so that it can secure a pending aid package and a second rescue package from foreign lenders, mainly the European Central Bank, the EU and the IMF. These measures have been placed on the government as a condition before releasing the next installment of the $11 billion required by the country to finance its expenditure from mid-October. From the lecture, austerity measures entail adopting a set of budget-cutting measures and reducing public spending and benefits. Therefore, in implementing austerity measures, the Greek government aims to reduce its spending to meet the lender’s conditions. The Greek government has already outlined its austerity plans that could include firing state workers.
From the lecture content, a budget deficit can have severe effects on the economy of a country, including lower public spending, reduced foreign confidence in the domestic currency which impacts heavily on the foreign exchange markets, increased tax revenues, reduced investor confidence, and generally lead to an economic slow down, eventually leading to a drop in a country’s GDP or recession. The paper goes on to say that Greece has been on a three-year recession, hence, it is only logical that that the government is ready to take bold steps to repair the already sore Greece financial market in order to avert the worst effects of a budget deficit. Indeed, the Greek economy has been forecast to shrink at 5.5 percent while the GDP is expected to shrink by 2.5% next year and if drastic action, such as the austerity measures, are not implemented, the country’s economy could sink into further recession.
The lenders have withheld the money to give the Greek president more time to implement the austerity plans. Under the austerity plans, nearly 30,000 public employees will have their wages lowered and later compelled to take early retirement or be sacked. From lectures, budget deficits may be corrected through increased borrowing, higher debt on payments, higher taxes and lower spending, increased interest rates, and in extreme cases, inflation. In the case of Greece, the government has plans of lowering its spending and increasing its borrowing, these measures are consistent with those taught in lectures. Hence, the Greek government is in the right path to recovery and if its austerity plans proceed as planned, it could come out of the three-year recession in the next few years.