What Happens If A Country Goes Bankrupt?
Many countries have been almost or completely bankrupt in recent history with Greece now on the brink of bankruptcy. So, what happens when countries go bankrupt?
A New Approach to Greece's Debt
Last month, Greece held a major election that brought a big victory for the far-left Syriza party. Although the party was not able to form a majority in parliament, Syriza formed an alliance with the Independent Greeks, a far-right party that has disagreeing opinions on most issues with one big exception-the opinion that Eurozone-led bailout has been a failure and a detriment to Greek independence. According to Vox, Greeks and the international audience are closely watching what happens next, as it could have major repercussions throughout Europe.
Syriza is led by Alexis Tsipras, the party's presumptive choice for prime minister, and he wants to overhaul the current approach to addressing Greece's massive debt. Up until now, the European Commission has essentially set up policies that roll Greece's debt forward without actually forgiving it. Greece has had no other choice besides following the rules set up by officials in Brussels, which has struck a cord with people like Tsipras (as well as hard-lined Greek nationalists on the right, including the Independent Greeks). Although Tsipras does not want to exit the European Union, he does want to halt the austerity measures and structural reforms, which have been the status quo brokered by the European Commission and Greece's parliamentary coalition.
The Greek bailout came with a host of budgetary austerity provisions, but these measures seem to only make conditions worse for Greek society. Amidst a major increase in child poverty and an unemployment rate of over 25%, Syriza is calling for an influx of new spending from the European Central Bank. The funds would go directly into Greek banks to jumpstart the economy. As of now, it's far from certain that European authorities will go along with this plan. Among other reasons, the European Commission does not want other countries, particularly Spain, to catch on and make similar demands.
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