Greece : A Debt Of More Than 350 Billion Euros

1515 Words Aug 18th, 2015 7 Pages
Road Ahead
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.
Being a part of the EU, it may ask for additional bailout funds and debt relief. But these will require stringer austerity measures to be followed by the Greek government. It would require them to cut public pensions, increase taxes, and privatise certain government owned businesses. This strategy of austerity measures, however, did not produce the expected results in the previous bailout and led to a Greek Depression and made it even harder for the government to pay back debt.
Greece potentially has two alternatives as discussed below.
Greece Exits the Euro Zone
Greece can strive for recovery by exiting the Eurozone and adopting Drachma as its currency. The relative devaluation of the currency will give a boost to its export industry and also allow it to repay its debt with cheaper currency.…

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