Economic Recovery and Strategic Challenges

Following the financial crash of 2008, European nations have been busy restructuring and rebalancing their economies, with varying success. Substantial sovereign and bank debt led the eurozone to fall into a prolonged recession in 2011 as the extent of its problems became fully apparent. This is in contrast to the far stronger growth rates being seen in the United Kingdom and the USA. Furthermore, deflation is now a severe and rising threat to the entire eurozone. The question has been ceaselessly asked since 2010 of whether, how, and in what form the region can survive. Since then the mood for an ‘austerity’ based rescue programme has changed dramatically, and the effectiveness of this approach in achieving real growth and debt recovery in the eurozone is even being questioned by the IMF — its proponent for financial crises around the globe for decades. Proposals are increasingly looking at how to avoid future government bailouts, and so save their costs from falling on the shoulders of taxpayers. In Greece, as in other bailout eurozone states, the tax burden is being felt mostly by the public sector and other salaried employees, where income tax is taken at source. Cyprus was, of course, advocated as an alternative approach — where the taxpayer would avoid shouldering the costs of the rescue package, at least directly.