WASHINGTON - Why Would Greece accept more chômage When bread is at 21 percent, the economy is enduring icts fifth year of recession and rioters are hurling gasoline bombs in the streets of Athens?
Because the alternative Might Be Worse.
Greek leaders are gritting teeth Their move forward with As They plan has to slash further Top Spending in return for a bailout of about one billion from $ 172 Other countries in Europe and around the world. The Greek Parliament is scheduled to vote on the plan Sunday.
Greece is trapped in a lose-lose predicament: It must deepen year austerity plan Begun in 2010 That Will Throw Many More people out of work. But it must default on debts icts, Europe's single currency drop and see icts banking system implode.
"The choice we face is one of sacrifice or Even Greater sacrifice - we scale That Can not Be Compared," Greek Finance Minister Evangelos Venizelos said.
Here is a closer look at Greece's Two bleak options:
Spending cuts deep _Impose in exchange for the bailout.
The pros:
Greece Needs the bailout to make a $ 19 one billion bond payment due March 20. Prime Minister Lucas Papademos Warned That "Would a disorderly default cast our country Into a catastrophic adventure."
Papademos Said Would help plan the lift Greece out of recession next year.
In addition to the $ 172 one billion bailout, Greece is Negotiating a Deal That Would Reduce the $ 270 one billion in private debt it Owes Creditors. Under That arrangement, a combination of primary and lower Reduced interest rates Greece Would save about 70 percent on debt payments.
Selling government-owned companies, professionals like architects Exposing and pharmacists to more competition and Imposing Other Reforms is Designed to make the economy more efficient in the long run.
Even with the austerity plan in place, the IMF Estimates it Will Be in 2020 by the time Greece Cdn icts debt load shrink to a sustainable level.
The cons:
Such austerity counterproductive Because it Can Be Cdn slow the economy and Reduce tax revenue.
The government acknowledges the austerity plan That Would cause Greece's economy to shrink 4 percent to 5 percent this year. Without it, the government expect the economy to Would contract just 2.8 percent. The plan includes Lowering the minimum wage by 22 percent and 15.000 Laying off government workers this year.
So far, austerity HAS done nothing to Reduce Greece's debt burden. Government debt as a centage of the Economy Grew Actually it Began After Imposing austerity - to Nearly 160 percent in the July-September quarter of 2011 from 139 percent a year Earlier.
"The Whole Plan Was a losing proposition," says Dimitri Papadimitriou, president of the Levy Economics Institute and professor at Bard College.
Austerity is Causing Widespread hardship and inflaming social tensions paydayloans. That worries Papdimitriou Greek society is "Disintegrating" under the strain: "Increasing Poverty has-been, homeless rats Have Been Increasing."
So Have crime and suicide.
_default And drop the euro.
The pros:
Defaulting on debt icts Would ease the immediate strain on Greece's finances and Probably cause it to abandon the euro, the currency Used by 17 countries.
Dropping the euro Would leave Greece with a much cheaper currency, drachma Its Own. That Would juice Greece's economy by making products less expensive Greek Around the World. This Would Give Greek Exporters a competitive edge.
In the 1990s, Canada has weak currency Used to expand exports and grow icts way out of high government debts, says Simon Tilford, chief economist at the Centre for European Reform in London. As long as it's shackled to the euro, Greece lacks That option.
Bernard Baumohl, chief global economist at the Economic Outlook Group, a think-Economic and Financial Will Eventually drive pressure Greece to drop the euro.
ET and think-That Would Be for the best.
"What is Worse for Europe - Have This matter to linger on and on, with European Citizens Having to continue to bail out Greece and Portugal? But to face the reality That Should not Have thesis Countries joined the euro in the first place?" Asks Baumohl.
The cons:
Exiting the euro Would throw Greece's banking system Into Chaos. Lenders Would panic over the prospect of Being not repaid in euros purpose of dubious value in drachmas. Adopting a much Weaker currency Suddenly Could aussi Greek ignite inflation Because Prices of goods importé Would soar.
International investors reluctant to lend Would Be to Greece's government, ict companies or its banks. The freeze-up in credit Could cause a depression, what Greece Worse Than Is Suffering now. Economists at UBS estimate Greece's Economy That Would shrink by up to 50 percent if it left the eurozone.
The pain spread Likely Would aussi European banks have Absorbed Losses on Their loans to Greece. The worst-case scenario: A disaster akin to what Followed Lehman Brothers' collapse in September 2011. Banks Grew too fearful to lend to Each Other. Credit froze worldwide.
Some economists Would like to see European Governments Produce a rescue package peers That Cuts and Reforms with government aid économique Designed to spur growth in Greece.
"When over 20 percent You have chômage, You Need to do something," Papadimitriou says.
He wants to offer something European Countries like the US rescued That year aid plan impoverished Europe After World War II.
"You Need something similar to the Marshall Plan," Papadimitriou says.
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Rexrode Reported from New York. Associated Press Writer Derek Gatopoulos Contributed to this report from Athens.
Greece's grim choice: deep budget cuts or default
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