Greece and the rest of Europe were cutting it close when all parties finally agreed on a preliminary deal that would allow further bailout talks. While the deal forces Greece to extreme austerity measures, Europe has avoided a possibility of one of its members from being forced out of the union (Reuters 7/13/2015). As the European Commissioner President Jean-Claude Juncker mentioned, the deal is not total defeat against the Greeks per se but a fair political compromise, if and only if, the Greece Prime Minister Alexi Tsipras is able to hold the current compromise to a successful vote in his parliament and win smart concessions from the EU in future negotiations.

There is a great theoretical argument that austerity under conditions similar to Greece would backfire and hamper economic recovery (The Guardian 4/29/2015). While economically conservative Germany wants Greece to quickly cut spending and focus on balancing the budget, austerity will dash Greece from any significant economic recovery in the near term. Some type of stimulus is favorable in order to jump start the Greece economy, which in turn would increase government revenue to pay down the national debt.

In the current political development, there is no possibility of a government stimulus from the Greek government due to the recent austerity agreement. Furthermore, stimulus investments by private actors, including foreign direct investments, seem unlikely given the chaotic political and economic conditions in Greece. Greece needs an economic stimulus, so how would the government of Greece get it?

The answer is the European Union.

Prime Minister Tsipras should compromise with German chancellor Angela Merkel and promise heavy Greek austerity measures for years to come. Such austerity policies will hurt many Greeks, given that cuts in pensions and other government services would likely reduce the fixed income for many dependents of the government. In exchange for austerity measures, Prime Minister Tsipras ought to negotiate hard on stimulus programs from the European Union itself. The European Union can use its member funds to invest in infrastructure projects and setup other EU-run projects in Greece. Such stimulus spending would, theoretically, create additional jobs, however temporary, to the people in Greece as long as the people of Greece are allowed to work in these various stimulus projects.

The EU being involved in transnational investment is not new. There already has been an investment project on improving the transportation infrastructure (The European Commission 1/29/2015), and thus Prime Minister Tsipras needs to focus on securing many EU projects to Greece in order to generate a potential economic stimulus for his country that is funded by the European citizens.

Even Germany knows that austerity alone would hamper Greeceā€™s economic development. A lean Greek government with a temporary economic stimulus in Greece by EU projects might be an attractive option for everyone in Europe.


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