We all know that there has been a high increase in taxation and very unpopular economic measures for many countries of the EU, especially in the last five years. Specifically, for the countries that borrowed a lot of money in order to survive the current economic crisis and to pay previous loans such as Greece, Spain and Portugal.
But with the passage of time and the continuation of the crisis, the repayment of these excessive loans became more difficult than ever. This leads the lenders (e.g. The European Central Bank, The International Monetary Fund and etc.) to demand more and more financial reforms, with the intention of making sure that they will get back the money they lent, without taking into consideration that the countries real economies will sink.
Of course these effects are well-known by both sides. Initially lenders want to get back the money that they lent for the recovery of premises as quickly as possible, which is quite normal.
On the other hand, the countries take strict financial measures, cut public expenses, the income of senior citizens and the income of people working in the public sectors, because they want to save money in order to pay the loans. But the measures they take contrast with what they can afford to pay with the money they borrowed.
Unfortunately, this cost is what makes things worse, governments in fear of not borrowing enough money to pay their expenses (salaries and pensions), take these measures without seeing the long term problems that will be created, such as the many job losses, reduction of salaries and lowering of the quality of citizens’ lives.
So why is it so difficult to balance the situation. This is largely because of the lack of a solid and good plan.
First of all, one of the problems is to understand the financial difficulties of every country separately. After that creditors need to have a unique plan for each of them and not to apply just a ‘’General Rule”. Lastly, they need more time to see the results and not expect short term gains at all costs, when the long term financial situation could be much worst.
In conclusion, it is sensible to argue that governments tax their citizens too much in order to pay their debts. But it is also important to realize and understand that the best way for lenders to take back their money, is to invest time and let the countries have a good period of financial growth, in order to avoid further difficulties and strict measures, and ultimately to allow the countries to be able to repay the loans.