5 July 2015

Fairness and the Greek Government Decisions

In the past weeks the Situation of Greece and its debts have been on the forefront of the main news channels in the world.

Of course, there is a lot of room for discussion and debate… mainly on macro-economic terms, but this is a blog dedicated to behavioural science, so I will restrict my comment on the topic of “Fairness”- which is a highly important behavioural element.

At least on the main European news channels, there is this oversimplification that developed, rather rich and more stable countries lend money to Greece (a lesser developed and competitive country). Oversimplifying even further, it is said that Germany (EU’s flagship) / German tax payers is / are lending money at very low interest rates to  Greece (kind of the problem child of the EU).

Things aren’t all that straight forwards as they are presented on TV. Greece received (and hopefully will continue to receive, though not unconditionally) money from three sources – (1) The EU commission mainly the Countries who use the Euro as a currency (aka. Euro-Group), (2) The European Central Bank and the (3) International Monetary Fund (IMF).

What is less known, is that among the countries contributing to the funds received by Greece there are countries such as Slovakia, Lithuania and Estonia. All of these countries are using the Euro as their currency. However, these countries are below Greece when it comes to GDP per Capita (per person) and the overall standard of living is worse in Slovakia, Lithuania and Estonia. Moreover, other countries have contributed indirectly to the funds received by Greece. For example, my country of birth – Romania – which does not use the Euro as currency, has increased its participation in the IMF so that the IMF would have additional funds to lend to Greece.

Unfortunately, Romania is way behind Greece in terms of standard of living and GDP per capita. Moreover, in 2010 Romania took some drastic and painful measures (e.g. 25% cut in all public servants pay, a VAT increase from 19% to 24%) in order to tackle the effects of the global recession.

Since we are talking about fairness, I have to be fair and say that the bulk of the funds allocated to Greece came from Europe’s most developed economies (e.g. France, Germany, The Netherlands, Belgium, Austria), but also from other large countries facing difficulties (e.g. Spain and Italy).

I am fully aware that the Greek Government and the Greek people have their arguments. Nonetheless, I wonder: how fair is it for Greece to reject the reforms for loans program and to take money from countries which are, overall, worse off?

How fair is it for the poor to support the middle class? Or is that happening already at other levels of society?

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