Financial Crisis And Its Effect On The Stock Crisis

Financial Crisis of 2007-2008 originated in the United States spread to the financial systems of many other countries, including CIS countries, by means of the domino effect. Bankruptcy of one of the largest Americans Bank, Lehman Brothers Holdings PLC, in someway was a launcher of this global crisis the scope of that can be compared with the Great Depression of the 30s of the last century. No one could have even believed that a crisis in the local market of subprime mortgage loans in the USA would have such enormous affect on the financial systems over the world and crash banking sectors of many countries one by one.

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.

Ever since the end of 2009, Greece has been involved in a financial and economic crisis that has been record breaking and shattered world records in terms of its severity and worldwide effects. The Greek government, since the beginning of the crisis, has attempted to take several governmental measures to try and “stop the bleeding,” including economy policy changes, dramatic government spending and budget cuts and the implementation of new taxes for citizens. In addition to this, the government has tried to alter the perceptions of Greek government and economy by the rest of the world in an effort to appear both more liberal and more democratic. Greece has also been working to privatize many previous

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.

The 2007 - 2009 financial crisis was the worst financial and economic crisis since the 1929 stock market collapse leading to the Great Depression, hence it has been dubbed the Great recession. This disruption in the economy due to the lost confidence in the financial institutions undermined the stability of the financial system and led to the loss of jobs and trillions of dollars in wealth and savings for entities within the economy. The gravity of the U.S crisis influenced the global financial system leading to a worldwide crisis.

The financial headlines of 2012 were prevalent with the tribulations of the Greek economy. Its problems, in the eyes of many of the other nations of the euro zone, were not only negatively impacting the prosperity of the Greeks, but also the viability of the European Union. The country as a whole requires a major restructuring. Not only are drastic changes needed in financial and economic policies, but the Greeks need to understand their attitude of government entitlements cannot be sustained. The mismanagement of the Greek economy is also evident in its place in the global market community. It has not found the path that a county needs to follow to become an active member of the vibrant,

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

Greece has many historical aspects such as the acropolis where many polytheistic worshipers came to worship the Gods, the first Olympics, as well as the first democracy, however one question that the whole world is asking is “will Greece’s debt soon be history”? The prime minister, Alexis Tripras, is unwilling to pay of the billions of euros of its debt. Germany and France has loaned billions of euros and are now trying to create a plan to solve this problem. The International Monetary Fund, European Central Bank and other organizations have declined all of Greece’s request for more loans. Although the majority countries in the world have debt, Greece has been loaned billions of euros from many european countries, the EU, and other international organizations; this is a problem because this country is doing all in its power to accept more grants, unwilling to give the overdue credits back.

According to the World Fact Book, in 2016, even though the public debt of the country is still 179.4% of Greece’s GDP, Greece saw slight improvements in GDP and unemployment. The economy remains stagnant, because of unfinished economic reforms, a massive non-performing loan problem, and ongoing uncertainty regarding the political direction of the country.

According to (Malpass, 2010) one the main reasons that caused the crisis is a Housing Market in US. Between 1997 and 2006, average house price has increased by 122%. In the end of 2001, national home price average median was ranged from 2.6 to 3.2 times median income per household. Proportional ration has grown to 4.0 in the beginning of 2004 and 4.6 in 2006. This has resulted to housing bubble “A run-up in housing prices fueled by demand, speculation and the belief that recent history is an infallible forecast of the future.” (Investopedia, 2014). Many householders started to refinance their estates at lower interest rate, or even taking second mortgages. In the middle of 2008, housing prices had been declined by 20% comparing to their 2006 peak. Easy loans and trend of house

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

Greece is currently undergoing a considerable hindrance regarding the economic recession. Huge public debt and the government 's decision to borrow from the International Monetary Fund and the European Union has changed the

In order to deeply understand the root cause of the debt crisis in Greece, we have to understand not just the economics of Greece but the policies that drove down the economy.

2. Government deficit: Huge fiscal imbalances developed during the past six years from 2004 to 2009, where "the output increased in nominal terms by 40%, while central government primary expenditures increased by 87% against an increase of only 31% in tax revenues."

Greece has a debt of more than 350 Billion Euros or close to 175% of its GDP. Its annual interest obligation is close to 23 Billion Euros. Unemployment is more than 25% and its annual GDP is declining by 2% per year. Greece is clearly in a grave crisis situation which is extremely hard to overcome. On June 30th, it became the first developed country to default to make an IMF loan repayment. It is in an urgent need of funds to make another loan repayment to European Central Bank on 20th August, to the tune of 3.2 Billion Euros. Its credit ratings have been recently revised by all agencies to the level of ‘Junk Bonds’, making it extremely hard to obtain financial help.