Causes of the Greek liquidity crisis; how conditions were before the crisis Events that happened

Before the crisis, the country had a GDP of 354.46 Billion Dollars with a minimum of 3% growth and was in par wit all European Union rules. According to the CIA as of 2016 Greece has a GDP of 195.21 Billion Dollars and a 2% deficit. Greece is still trying to recover

Greece is no different than other countries who have been forced to accept IMF loans, the vast majority of these funds end up flowing back into the multinational banks who made the risky loans. The Troika has made demands of increased privatization of national assets as collateral and the destruction of labor rights. All these policies are the exact opposite of what the Greek people voted for when electing the Syriza party. The conditions attached the bailout loans are the exact opposite views of the traditional

The country adopted the Euro in 2001, three years after many other EU countries had already done so, due to budget deficits the country was going through whilst under the drachma (Buchanan, 2015). As a result of their adoption of the Euro, they experienced a period of economic growth from 2001-2007, but many economists deemed it “unsustainable” due to the country taking out cheap loans through the EU (Buchanan, 2015). In 2008, when the global market crashed, Greece was unable to climb out of debt, as unlike in the past, where it could simply print more money, due to them being under the Euro, which is controlled by the European Central Bank, they were unable to do so. As a result, unemployment skyrocketed in the country, reaching heights of 25% (Buchanan, 2015). Following the beginning of the debt crisis, the number of terror incidents spiked from 18 in 2007 to 118 in 2009 (START, 2016a). As many domestic terror organizations in Greece are anti-capitalist, they likely blamed the foreign corporations and banks for the financial crisis and attacked their property as a result. When Greece was bailed out twice, once in 2010 and again in 2012, it unfortunately did not fix the problem as the money the country was given was simply turned around and used to pay off international debts rather than stimulate the economy (Buchanan, 2015). This failure to protect the investments of the Greek people may have led to another spike in incidents in 2013 (START,

Where they had not yet adopted the euro nor ascended into the union, Greece's public service sector (though accounting for half the countries GDP) was seen to seriously hinder any efforts to increase economic growth. But since accession, rapid mobilization of the economy has started to route out the stitches in the corrupt service sector (most reform has been in recent years though). But rapid economic reform didn't come directly after accession, for it wasn't until recently that Greece started better allocating EU subsidies. Until the country had finally set out to reform its poorly structured civil service sector, much of the subsidies were seen to be wasted on remedial government plans and initiatives such as increased electorate pay. Abuse of subsidies was recorded up until the early 90s, but since then Greece has seen considerable returns in foreign investments, and a marginal decrease in both the national debt and inflation rates . To better illustrate Greece's economic standing today, one might take note of the fact that the country is now in a position to distribute large amounts of aid (E.g., Bosnia- Herzegovina) while slowly relying less and less on EU subsidies. Many also believe that Greece's poor economic strategies in early years should serve as a lesson for future Balkan members awaiting accession into the EU as well.

The article “How Germany Prevailed in the Greek Bailout” discusses Germany’s successes financially in comparison to most other (19 countries) in Europe. Although Germany has such success others see the country as a bully almost due to their militaristic background even though they have come to the aid of Greece and helped. Many other European countries are hesitant about Greece receiving aid considering the countries past failures financially. This is not the first time the country has been in debt and undoubtedly will not be the last. Since the economy fell in 2008 Greece’s unemployment rate is about 22% which is double the U.S. Due to an imbalance in European countries where some are creditors and others debtors it is difficult to fix this

This credit was available until 2008, when the U.S. housing market crashed, and the global economy tightened up everywhere (“The European Debt Crisis Visualized”). Greece suffered terribly from this because their economy relied on borrowing and deficit spending. Without being able to borrow that money, not only their economy, but all of Europe’s economy suffered.

As far as Greece’s role in creating this crisis in the first place, it can be said that Greece is at fault for a variety of reasons. The media has been focusing on the corrupt political system and infrastructure, the lack of competition in the private sector, the wastefulness and inefficiency of the public sector and a flawed tax system as causation for this mess. When the public sector was expanded in the 1980’s, Andreas Papandreou was given various agricultural subsidies and grants to do with what he pleased. This enabled the funding of certain post-World War II groups to heal political wounds and fund unions and other special interest groups to aid his political capital and strength. The policies enacted in this decade allowed for the increase in power and funding of the middle class by creating a vast amount of inefficient public sector government jobs for citizens. This resulted in an increase in the levels of inefficiency, bureaucracy, corruption and wasteful spending coupled with the increase in wages, pensions and benefits. This proceeded to drain through government money and resources, and did not breed a culture of highly motivated, efficient and effective government employees. A high amount of debts accumulated as the nation continued to proceed in this way, using state money to subsidize failing businesses

The roots of Greece’s economic problems extend deep down into the recesses of history. After the government dropped the drachma for the euro in 2001, the economy started to grow by an average of 4% annually, almost twice the European Union average. Interest rates were low, unemployment was dropping, and trade was at an all-time high. However, these promising indicators masked horrible fiscal governance, growing government debt and declining current account balances. Greece was banking on the rapid economic growth to build upwards on highly unstable foundations. In 2008, the inevitable happened – the Greek debt crisis.

In the academic paper Monetary Policy before and after the euro: Greece the author, Michael G. Arghyrou, asks the question of how Greece managed to join the Eurozone with very high inflation in the 1990’s. Arghyrou also discusses whether or not Greece’s economy fits the Euro Central Bank’s policies. The major conclusions from the study that are relevant to my study include: foreign markets have determined monetary policy in Greece since the 1990’s and Greece has not been compatible with the Eurozone policy since it joined in 2001.

In 1999, ten European nations joined together to create an economic and monetary union known as the Eurozone. Countries, such as Germany, have thrived with the euro but nations, like Greece, have deteriorated since its adoption of the euro in 2001. The Eurozone was created in 1999 and currently consists of eighteen European nations united under the European Central Bank and all use the euro. The Eurozone has a one point six percent inflation rate and an eleven point six percent unemployment rate in 2014. Greece joined the Eurozone in 2001 and was the poorest European Union member at the time with a two point six percent inflation rate3 (James, 2000). Greece had a long economic history before joining the Eurozone. The economy flourished from 1960 to 1970 with low inflation and modernization and industrialization occurring. The market crash in the late 1970’s led Greece into a state of recession that the nation is still struggling with. Military failures, the PASOK party and the introduction of the euro have further tarnished Greece’s economic stability. The nation struggles with lack of competitiveness, high deficit, and inflation. Greece has many options like bailouts, rescue packages, and PPP to help dig it out of this recession. The best option is to abandon the Eurozone and go back to the drachma. Greece’s inflation and deficit are increasing more and more and loans and bailouts have not worked in the past. Leaving the Eurozone will allow Greece to restructure and rebuild

The only option Greece had was to borrow money and lots of it. The borrowed money turned out to be something that Greece was unable and is currently unable to pay back. Germany was the largest creditor, lending over 240 billion euros . Other lenders included the International Monetary Fund (IMF), the ECB, and some of the other members of the EU. Greece is struggling with its debt. One way to recover would be having to stop paying money into pensions and public

Although a commonly accepted view is that the hidden budget deficit in Greece is the beginning of the European sovereign debt crisis, the real causes of this economic crisis can be various. To reveal the whole event, a comprehensive review of the background is

There must be something wrong inside Greece. However, it is hard to claim that the Greek government intented to show a misleading report to the EMU (European Monetary Union) or Greek government itself cannot even understand how bad status they were in. According to the criteria of EMU, Greece must decrease the debt and improve the financial performance, so a new government which was settled in 1993 puts forward a convergence policy in order to restrict the

In 2008 Greece was not influenced by the crisis but later in 2009 the country fell into recession and the financial markets exerted pressure, which made the economy being vulnerable. At the beginning of the sovereign debt crisis, the budget deficit of Greece was erected at 13.6% from 12.7% (Eurostat, Euroindicators, 22/2010, 22 April 2010) and the external debt at 127% of the GDP (Eurostat, Euroindicators, 60/2011, 26 April 2011). In order to to deter a default on its sovereign debts, the government of Greece agreed on a loan by Eurozone states and the International Monetary Fund (IMF). The loan agreement was 80 billion € from Eurozone states and 30 billion € from IMF. The agreement was between the Greek government and the European Commission (EC), the European Central Bank (ECB) and IMF (the ‘Troika’), in which they agreed that the EC, ECB and IMF had to prepare a program for Greek economy. The Ministry of Finance in cooperation with the ‘Troika’ prepared a program called ‘Memorandum of economic Policy and Financial Policies; (MEFP) and the ‘Memorandum on Specific Economic Policy Conditionality’ (MSEPC)(The Memoranda). The MEFP had to do with the fiscal reformations and income policies that Greece had to undertake. The Memoranda was connected with the Act 3845/2010 on ‘Measures for the Implementation of the support mechanism for the Greek economy by the Eurozone Member states and the International Monetary Fund’ and the Greek Parliament enacted into law on 5 May 2010. The

An inspection ordered by the recently chosen Socialist administration, exposed how public deficit for 2009 was stated to be 5.4% of GDP instead of roughly 6% specified by the preceding administration. The cost of borrowing started to rise intensely and monetary markets shut for Greece in a period