Question:
The Greek financial crisis has occupied a significant space in European and global events, sparking extensive debates, analyses, questions, and predictions. Subsequently, Greece's approval of the European bailout plan was announced. We ask: What is the reality of this crisis and how did it arise? What is the role of the influential countries in this crisis? Finally, will this plan solve Greece's crisis? Forgive the length of the question, and may Allah reward you with goodness.
Answer:
To answer this, we will review the most important recent aspects of this crisis, especially since we reviewed the ongoing situation in our analysis dated 28/02/2015. Nevertheless, we will touch upon what has passed while focusing on the latest developments:
First: The Reality of the Crisis:
The roots of the economic crisis in Greece began since it entered the Eurozone in 2001. The US government conspired through American credit rating agencies to raise Greece's credit rating, making it acceptable for entry into the Eurozone. Greece was aware of this; it "hid its financial situation from the leaders of the Eurozone. After joining the Euro, the centrist government led by Konstantinos Karamanlis came to power in March 2004 to discover horrifying facts, the most important of which was that the budget deficit was not 1.5%, as the previous government stated when joining the Euro, but rather it amounted to 8.3%, which is five and a half times higher than what was believed" (Ida'at Misr al-Arabiya, 22/07/2015). Thus, America wanted to plant explosive mines in the Eurozone so that if those debts exploded, the Eurozone would fall into a crisis, causing the value of the Euro to drop and preventing it from competing with the Dollar. This is exactly what happened; not much time passed before the Greek crisis was exposed, revealing its massive debts.
Since 2008, Greece has been trying to escape the crisis by borrowing to pay off debts, but to no avail. Successive governments persisted in pumping money into the economy through borrowing as well, but failed to save the country's economy. Greece borrows to pay its accumulated debts, to pay the debt services of compound usury (riba), and the insurance fees it pays on its debts. "Here, other countries in the Eurozone intervened in the form of what is called the Troika, consisting of the European Commission, the European Central Bank, and the International Monetary Fund, to support Greece. In May 2010, Eurozone leaders and the Greek government agreed on a bailout loan worth 110 billion euros, but the bailout came with strict conditions, including improving government tax collection and reducing public spending in an attempt to balance the country's general budget. Because the first bailout loan was not enough to improve the situation in Greece, the government agreed in February 2012 to obtain another bailout loan, bringing the total borrowed funds to 246 billion euros. A new austerity plan was agreed upon with harsher terms than the first, making things worse as unemployment rates reached more than 25%, and rose among the youth to more than 50%." (Ida'at Misr al-Arabiya, 22/07/2015). This led to a decrease in tax revenues, resulting in a severe drop in the government budget and rendering the Greek government unable to pay its debts when due. Greece struggled to meet its debts to the IMF and the European Union Bank and tried to negotiate with them, but the creditors refused to change the payment terms. Thus, Greece continued to falter in its economic situation, drowning in debt... and the government began thinking about a new austerity package! However, the people in Greece had suffered bitterly from previous austerity packages. In the elections of November 2014, Tsipras exploited this situation, making his election campaign anti-austerity and mobilizing people to reject European Union projects and creditor conditions, promising that if he won, he would renegotiate with terms that included no austerity... then he won the election.
Tsipras was unable to change any of the terms of the European Union and the creditors, nor could he make them reduce the debts despite the protests and demonstrations he mobilized people for. This is because he was facing "capitalist policies" that suck blood with the right hand, and he faced them with a mixture of "capitalist and socialist policies" that suck blood with the left hand! These policies do not create a prosperous life or a straight path for living, but rather a conflict that hardly ends... Thus the crisis worsened, and confidence in the Greek banking system dropped—or rather, was stripped away—leading to an escalation in deposit withdrawals: "The Kathimerini newspaper said that Greek depositors have withdrawn more than two billion euros since the beginning of this week, according to Greek bank estimates..." (Al Jazeera, 21/02/2015). "Data issued by the Greek Central Bank revealed that deposits in private banks declined by about 23 billion euros, representing approximately 18% of total deposits in the period from November 2014 to March 2015..." (Argaam, 03/06/2015). And "the volume of funds withdrawn in the period between June 15 and 18, 2015, reached about three billion euros ($3.39 billion), representing about 2.2 percent of total individual and corporate deposits in Greek banks at the end of April" (Reuters, 19/06/2015).
Even though Greece was drowning in the crisis and its condition was pitiable, the European Union, especially Germany, continued their sharp offensive full of austerity conditions. Germany asked Greece to implement an austerity program in exchange for financial bailouts and economic assistance. This included Greece cutting its spending, completely stopping spending on social welfare, reducing government jobs, and making debt repayment the priority, regardless of the pain this would cause the average Greek citizen. The austerity measures imposed by Germany led to social, economic, and political chaos. Thus, the current crisis intensified, especially when withdrawals from banks increased, followed by the closure of banks... Negotiations began, and the Greek government requested an additional four-month bailout period, hoping these negotiations would succeed in improving the terms of this bailout agreement, which was scheduled to end in June 2015. These were the negotiations promised by the leftist Syriza party if it won the elections at the end of 2014—that it would renegotiate Greece's debts and not submit to the creditors' austerity conditions, on which basis it won the elections... The Greek government was scheduled to pay a debt of 1.6 billion euros to its creditors at the end of June, but it needed bailout funds from the European Union to make this payment, so it wanted to change the terms of the agreement to obtain these funds. This renegotiation led to many meetings that did not reach an agreement. Therefore, IMF spokesman Gerry Rice explained on Thursday, June 11, why his negotiators withdrew from the Greek bailout talks, saying: "The ball is very much in the Greek court; there are major differences between us in most key aspects. There has been no progress in narrowing these differences recently," and the IMF accused Athens of not making concessions. He was followed by the Dutch Finance Minister Jeroen Dijsselbloem on June 12, who said: "...we cannot help Greece if Greece does not want to help itself... they have to come up with serious proposals."
The Greek government proposed multiple sets of suggestions instead of the EU terms, but the EU rejected them every time. In contrast, the EU package offered consisted of sharp cuts in pensions, government employees, and the government budget in exchange for bailout funds and money for Greek banks. Germany led this package strongly, while the Greek government wanted to cancel debts, distribute austerity over more years, and generally rejected the intensity of the austerity demands made by the EU... Since the EU negotiators refused to change their terms and withheld the funds Greece would have used to pay its debts due on June 27, the Greek government announced it would present the conditions proposed by the Union in the negotiations to the people in a referendum on July 5, 2015... The Greek government was trying to blackmail the European Union by using the referendum, hoping that the EU negotiators would soften their stance.
On the eve of the referendum, the Greek Prime Minister urged voters to reject those conditions and vote "No". To encourage those who wanted to stay in the EU to vote "No", Prime Minister Tsipras said in a televised speech that Greece's membership in the Eurozone was not at risk... On July 5, the vast majority of Greek citizens voted to reject the bailout terms, with 61% voting "No" while 39% voted "Yes", and the participation rate in the referendum was 62.5%... Even though the vote was "No", it did not move the Union, especially Germany, from the same conditions. Therefore, Greece agreed to submit new proposals to the Eurozone summit on July 7. Nevertheless, the German Finance Ministry refused to study any proposal to reduce Greece's debt!
After much back and forth, the Eurogroup and Greece reached an agreement on 13/07/2015 to hold talks regarding what is called a bailout program worth 86 billion euros for three years in exchange for keeping the near-bankrupt country within the Eurozone. This agreement, which the Greek government was forced to sign, stipulates increasing taxes, reforming the pension system (further tightening for retirees), establishing a mechanism to cut expenses, adopting the Code of Civil Procedure, setting a law related to providing Greek banks with liquidity, and carrying out privatizations of public property that the current government had opposed. It also involves establishing a fund related to this, to be handed over to the three powers creditor to Greece—the European Commission, the European Central Bank, and the IMF. Representatives of these three powers will return to Athens to oversee the Greek economy, with the authority to object to government decisions and intervene in some draft laws and referendums. Under the agreement, the Value Added Tax (VAT) in Greece will be increased from 13% to 23% on many services and goods. Greece managed to agree on restructuring its debts, which reached 320 billion euros, but without being able to write off any part of it. It obtained a medium-term loan in a package worth 35 billion euros on the pretext that it might bring new investments to lift the country out of economic recession... Thus, Eurozone leaders forced Greek Prime Minister Tsipras to abandon his pledges to end austerity and forced Greece to cede a large part of its sovereignty to external supervision by those three creditor powers. Accordingly, the European Union's emergency fund provided an urgent loan to Greece on 20/07/2015 of 7.16 billion euros to pay its urgent debts to the IMF and the European Central Bank as part of the European bailout plan for Greece. The Greek Ministry of Finance said that it: "will pay (from this loan) 4.2 billion euros of the principal debt (amounting to 3.5 billion euros) and the interest due on it (amounting to 700 million euros) to the European Central Bank, in addition to 2.05 billion euros to the IMF from arrears due since 30/06/2015, and will also repay a loan worth 500 million euros to the Greek Central Bank" (Asharq Al-Awsat, 20/07/2015). The loan from the Union's fund is not to save its economy, but rather it borrows to pay the urgent debt, which is part of a large accumulated debt and compound usury (riba). Thus, Greece will continue to drown in the quagmire of debt.
Following this, Greek banks opened their doors for banking services under restrictions on withdrawals and capital controls, which will remain in effect for at least another month, though eased, following a decision by the government which had closed them for three weeks... However, such measures will not revitalize the economy and will harm many companies due to the inability of consumers to withdraw or borrow from banks, as these remain restricted to limited amounts. The Greek Parliament approved the agreement on 16/07/2015 by a large majority of 229 MPs against 64. The approval came from opposition parties that defend staying in the Eurozone at any cost, and it was their vote that achieved this majority because the votes of the ruling Syriza party, led by Prime Minister Tsipras, were not enough. 38 MPs from his party were between rejecting and abstaining, including the former Finance Minister and the Deputy Speaker of Parliament. Tsipras's approval of the agreement caused a rift in his party because he let down 61% of his people who voted "No" to the austerity policy at his request! This is the democracy that rulers use as a mount to ride the backs of the masses to achieve their own interests! This deal approved by the Greek Parliament is even more austere than the one the people said "No" to in the referendum on the bailout plan on July 5; in fact, it is harsher than previous bailout plans... Former Greek Finance Minister Yanis Varoufakis expressed this to the BBC on 18/07/2015, saying: "The reform program imposed on Greece will go down in history as the greatest disaster in economic management ever... This program will fail regardless of who tries to implement it... Tsipras, who admitted he does not support the new bailout program, had no choice but to agree... We were given a choice between execution and surrender, and Tsipras decided that surrender was the superior strategy"!
Second: The Role of Influential Countries:
- Germany: Germany played a major role in the talks and in the hardening of positions, showing insistence on implementing the plan and that Greece would not remain in the Euro if it did not adhere to the conditions. It stated it would not be tolerant after Greece's exit from the Euro but would demand repayment of its debt, especially since most of Greece's debts are to German banks. Germany also does not want Greece to set a precedent where other countries in the EU might request debt cancellations in the future. Therefore, it was leaking news that it would expel Greece from the Eurozone and displayed this in negotiations. For example, AFP quoted a European source two days before the agreement, on 11/07/2015, saying that "Germany has drawn up a plan for a temporary exit of Greece from the Eurozone for five years in case it fails to improve its proposals to obtain the aid plan." The direct negotiator was German Finance Minister Wolfgang Schäuble, a political veteran in such matters... Former Greek Finance Minister Yanis Varoufakis stated: "German Finance Minister Wolfgang Schäuble did not see Greece's exit from the Euro as just the only possibility for clear negotiation, but rather he also seeks to subject the entire Eurozone to his dictates... He wants to expel Greece from the Eurozone to intimidate the French and force them to submit to a Eurozone model where strict discipline prevails."
(BBC, 11/07/2015). For the record, this Greek minister, Yanis Varoufakis, is known for his stubborn positions toward Eurozone finance ministers; thus, it is likely his resignation was at the request of his Prime Minister Tsipras as a reconciliatory step toward the Eurozone finance ministers with whom he repeatedly clashed and who no longer wanted him in negotiations, headed by the German Finance Minister. That step was a signal from Tsipras that he was ready to concede and was keen to keep Greece in the Eurozone, fearing the consequences of exiting. If Greece left, he would not be able to handle its problems and would be held responsible for both: the exit from the Eurozone and the failure to address the country's economic problems, leading to his fall and the fall of his government and party... Thus, Germany's toughness and its disregard for Greece leaving the Eurozone if it did not comply with terms succeeded in making Greece agree to what it had rejected before and considered a red line! This is on one hand. On the other hand, Britain wants to hold a referendum in 2017 on staying in or leaving the European Union. Britain is trying to blackmail the Europeans with this, scaring them with the results of the referendum, implying that its exit will affect the Union, so Germany must support Britain economically so that the people in Britain vote in favor of staying in the Union... Germany, with its strict stance toward Greece even if it exits the Eurozone, wants to send a message to Britain that it will not be lenient in economic matters with any country in the Union that violates the conditions, and that it is not afraid of the referendum results... Furthermore, it seems Germany has other purposes behind its stubborn stance toward Greece—either to commit to the conditions or be expelled from the Euro—including proving its leadership of the Eurozone and the European Union, and that it is the one with the final say, to compete with France and bypass it to lead Europe.
France: France is a country that plays a major role in the European Union and the Eurozone... but its influence is less than German influence. Therefore, it returns to agree with Germany's opinion if Germany insists. This was clear in the Greek crisis; France was working to keep Greece within the Eurozone. The French presidency issued a statement on 08/07/2015 that "Hollande stressed the importance of reaching the goal of keeping Greece in the Eurozone during his meeting with the Slovenian Prime Minister at the Elysée Palace" (AFP, 08/07/2015). French Prime Minister Manuel Valls stated: "France will do everything in its power to prevent Greece's exit from the Eurozone, a step that, if it happened, would have geopolitical repercussions and harm the global economy." (Sky News, 09/07/2015). However, in the final decisions, it did not oppose Germany in its strict positions toward Greece regarding its obligation to adhere to all conditions or be expelled from the Eurozone, so Greece succumbed and then France agreed... In any case, the French are for strengthening the power of authority in the Eurozone and the European Union because they are among the early founders and aspire to have leadership in them to strengthen their international position. Even French President François Hollande was encouraged after passing this crisis and succeeding in imposing the Eurozone's hegemony over its members, so he began calling for "the formation of a Eurozone government with a specific budget and a parliament to ensure its democratic dominance..." hoping by that to approach Germany's weight in the Eurozone in its current state.
America: America was interested in the issue and monitored it closely. Its President Obama contacted French President Hollande by phone, as announced by the French presidency regarding a call between them on 29/06/2015, stating that "they agreed to exert joint efforts to prioritize the resumption of talks and allow as soon as possible for a solution to the crisis and guarantee financial stability for Greece" (AFP, 29/06/2015). A day before that, Obama called German Chancellor Merkel for the same purpose. The US President was urging the Europeans to continue negotiations regarding the Greek bailout deal, address its problems, and not expel it from the Eurozone. White House spokesman Josh Earnest stated: "The referendum in Greece is over, but our view remains the same: it is in the interest of both the European and Greek sides to find a solution that allows Greece to remain in the Eurozone" (AFP, 07/07/2015). America wanted to pressure the Europeans, especially Germany and France, regarding Greece to write off part of the latter's debts. It sent its Treasury Secretary Jacob Lew to Berlin on 16/07/2015 to meet his German counterpart Wolfgang Schäuble to learn firsthand about the measures taken by the key players on the European stage. After that, he left for Paris to meet his French counterpart Michel Sapin. He had announced before the start of this tour: "Its goal is to focus on discussing the conditions of the global economy and ways for Greece to develop within the Eurozone with Greek partners." The German minister responded by expressing Germany's rejection of American proposals, telling Germany's Deutschlandfunk radio: "Debt cancellation is incompatible with membership in the Eurozone monetary union, and I suggest Greece exit voluntarily, as that is the best way for it." Germany's response was firm through its minister, challenging the Americans by stating that debts cannot be canceled... This is perhaps one of the few times a German minister has challenged American policy! Obama had suggested to the Europeans to help Greece so it stays in the Eurozone. America is pushing in this direction; it wants Greece to stay in the Eurozone and works to support it to use it, because it realizes that Greece is a weak point in this region due to its economic situation which cannot be cured under the capitalist system. Thus, it will remain a burden on Europe and an element of destruction threatening this region and the European Union. America wants to strike the Euro and bring it down, as the Euro has grown, strengthened, stabilized, and its area of global transaction expanded, making it a competitor to the dollar despite the lack of a single political system for these countries, but rather due to the insistence of Germany and France to maintain it... Moreover, America does not want the European Union to become a political and economic power competing with America, so it wants Greece and other countries that constitute weak points in the Union's body to remain so that it stays weak or collapses, so that Europe does not escape from under the American umbrella. As we mentioned before, America contributed to hiding Greece's financial reality through American credit rating companies that raised Greece's rating to enable it to enter the Euro while it was in crisis; thus, once its debts were exposed, the Euro would no longer be able to compete with the dollar... consequently, the Euro remains unable to compete with the dollar due to the debt crisis of Greece and its likes... The European Union, and Germany in particular, must realize that America is interested in weakening the European Union, especially its monetary unity, the "Euro," so that the dollar remains supreme...
Third: The Bailout Plan and the Solution to the Greek Crisis:
Greece's debts amount to 320 billion euros, even though the government budget is only 91 billion euros from an economy that does not exceed 240 billion euros; meaning Greece's debt is more than the total of its entire economy. The IMF classified it as "unsustainable debt." A document presented to European leaders on 11/07/2015, before the agreement was reached, stated: "Greece's debt can only be made sustainable through debt relief measures that go much further than what Europe has been willing to consider so far." The document confirmed that "Greek debt cannot be managed at all and its ratio is about to reach 200% of Athens' GDP in the next two years, noting that it currently stands at about 175%" (AFP, 15/07/2015). Romano Prodi, who previously served as Prime Minister of Italy and President of the European Commission, spoke to Germany's Deutschlandradio Kultur on 15/07/2015, holding Germany partly responsible for the worsening of the Greek crisis, saying: "The German government was not flexible. The Greek government committed thousands of mistakes, this is clear, but there is forced management practiced upon it as its decision-making authority is stolen, and this will leave dire consequences in the future...". He spoke about: "the existence of a deep trench between Germany and many countries" and said: "We prevented the worst but did not solve the problem." He mentioned that: "Without achieving more political integration, Europe will be threatened with becoming a colony of the two great powers, the United States and China." Therefore, the feet of the Eurozone, and even the entire European Union, are not standing on solid ground but on a fragile one prone to collapse in a period that may not be far off...
Accordingly, the Greek crisis was not solved by the bailout plan; it persists and will return again. After three years, debts will have accumulated and Greece will not have been able to pay off a portion of the usury (riba) imposed on it. It currently owes 320 billion euros and will borrow 86 billion euros over the next three years, and the usury on it will double while the insurance fees on its bonds will increase. After this period expires, talk about it will return. German Chancellor Merkel stated: "She is ready to consider a plan to ease the Greek debt burden, but after the required economic reforms are implemented, and she is determined to discuss reducing interest rates and extending financial maturity dates, as we will not write off 30 or 40 percent of Greece's debt while it still uses the single currency" (BBC, 19/07/2015). So the debts remain, and nothing significant will be written off; rather, the issue is reducing interest rates... If the usurious interest is reduced, it will not save Greece, nor will extending the maturity dates save it. Rather, the problem will remain, and the debt will double rapidly due to usury, no matter how low its rate. This is in addition to the fact that Greece has no resources capable of paying these debts; it is fundamentally incapable and bankrupt, and it lacks the thought that could revitalize it. If you add to Greece other countries living in similar conditions, we can say that the Eurozone and the European Union area will remain suffering from significant weak points that threaten their existence.
Thus, there remains no solution for the entire world for its problems except Islam, which elevates the human being and makes them happy with its economic and financial systems that address their problems completely. It ensures the distribution of wealth to its rightful owners, preventing its accumulation in the hands of a wealthy few, prohibits usury (riba) and insurance, and prevents the enslavement of people when need drives them to borrow. Furthermore, Islam prohibits imposing conditions that humiliate people due to debt, so they are not at the mercy of creditors. Thus, people will not find tranquility in their lives and achieve their dignity under any other system. Truly did Allah, the Most Kind, the All-Aware, speak:
فَمَنِ اتَّبَعَ هُدَايَ فَلَا يَضِلُّ وَلَا يَشْقَى ۞ وَمَنْ أَعْرَضَ عَنْ ذِكْرِي فَإِنَّ لَهُ مَعِيشَةً ضَنْكًا
"Then whoever follows My guidance will neither go astray [in the world] nor suffer [in the Hereafter]. And whoever turns away from My remembrance - indeed, he will have a depressed life." (QS Taha [20]: 123-124)