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Discussion: EU/IMF Bailout Loan

Discussion: EU/IMF Bailout Loan

Discussion: EU/IMF Bailout Loan


In August 2010, Greece qualified for the second tranche of the EU/IMF bailout loan, and in October the Greek government unveiled an even tougher austerity budget for 2010 with new taxes and a higher value-added tax (VAT) rate. Finally, in November the EU and IMF approved the third tranche of rescue funding for Greece.

Greece’s financial crisis deepened in 2011 and 2012 as mass protests destabilized the government. Worse, the crisis spread like a contagion to Ireland, Portugal, Spain, and Italy. In 2012, Spain’s economy tanked, threatening to overwhelm euro zone efforts to save the euro. In January 2015, Greece elected a new government, and the EU faced the first anti-austerity ruling party, Syriza, led by Alexis Tsipras. Syriza claimed about 36% of the vote, enough to gain 149 seats in the 300-seat parliament and falling a gnat’s eyelash short of an absolute majority. Prime Minister Tsipras moved quickly to bring the small right-wing Independent Greeks party with 13 seats into a governing coalition and made it clear that he did not intend to kowtow to the “troika” (the European Commission, the European Central Bank and the IMF) underwriting Greece’s bail-out program. The fate of the euro (and global economy) hangs in the balance.

The Schengen area grew out of a 1985 agreement among five countries (France, Germany, and the Benelux countries—Belgium, Luxembourg, the Netherlands) to create a passport-free zone. The Amsterdam Treaty incorporated the Schengen system into the EU acquis in 1997. Today twenty-five countries, including several not in the EU (Iceland, Norway, and Switzerland), belong to Schengen; and it is possible to travel from Finland to Greece by car, train, or bus without a passport, much like traveling within the United States.

The Emissions Trading Scheme (ETS) is Europe’s major climate change project, a cap-and-trade system that sets limits on the volume of pollutants the five dirtiest industries in any given country can spew into the atmosphere each year. Companies that exceed allowances can buy pollution permits from other entities that have “credits” or unused permits.