Greece : A Major Economic Crisis

In order to be a member of the EU, you must be able to maintain and prove a stable economy. Greece's economic difficulties, it have impacted the EU as a whole. If one country is unable to prove their economy

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

In May 2012, the financial crisis in Greece and the impossibility of forming a new government after elections led to strong speculation that Greece would have to leave the Eurozone shortly.

After the EFSF bailed out couple of countries including Greece, they decided to find and use a long term strategies in order to enhance liquidity in the EU banking system and there are couple of those rescue solutions:

The Eurozone is facing a serious sovereign debt crisis. Several Eurozone member countries have high, potentially unsustainable levels of public debt. Three—Greece, Ireland, and Portugal—have borrowed money from other European countries and the International Monetary Fund (IMF) in order to avoid default. With the largest public debt and one of the largest budget deficits in the Eurozone, Greece is at the centre of the crisis. The crisis is a continuing interest to Congress due to the strong economic and political ties between the United States and Europe.

The economic crisis of 2008 in New York had ripple effects around the world, causing deep structural problems within the European Union to crumble the economies of several countries. These countries, known as the PIGS, are made up of Portugal, Ireland, Greece, and Spain, and collectively hold most of the sovereign debt problems of the European Union. After fast growth early in the decade, these countries were spending too much money and not securing their own banking sectors with enough capital. Soon, the debt the PIGS owed caused massive problems throughout the EU, and Germany and France had to come to the rescue of these poorly managed countries. (Greek Crisis Timeline, 1) Now, in 2012, the issue has yet to be fully resolved. Greece is still sinking, and a massive bailout for Greece's banks is required. The debate is whether Germany should continue bailing out Greece and collecting interest on its loans, or whether Greece should try to separate itself from the broader European Union, in an attempt to manage its own finances and declare bankruptcy in order to save itself from crippling interest payments. Each path offers an escape from the present situation that Greece finds itself in, but only the path of bailout results in a harmonious European Union. If Greece fragments off from the EU, then the entire union is weakened as a result. I believe that Greece should accept the terms of the bailout that Germany has provided, and should undergo several years

Greece's economy is in far worse shape than when the outlines of a deal were put together last October, so there is a bigger financial hole to plug. Germany and other rescuers don't want to offer more money, not least

How is it possible for an economy, associate of the Eurozone, that was considered to be an achievement of junction in Europe for more than a decade to turn out to be considered a deep fiasco in the early 2010 and undergo a profound and exceptional financial catastrophe, in which it vanished nearly 25% of its GDP in a time frame of 5 years. Observation of the Greek economy by global policy makers and markets changed significantly in a period of a few months. It was an uncommon episode in financial history that merits a closer analysis in order to evade alike conditions in the future. The understanding or the perceptions about the reasons of the crisis define to a great degree the policy answer to the crisis. The debate about the policy mix develops a more complex issue when the origins of the crisis are both national and European. The policies that were applied in order to challenge it and particularly about the strength of the affiliation among the roots of the disaster and the policy reaction mix. Finally, it would definitely benefit us all to know if there was a substitute policy response track.

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

In 2010, the IMF unanimously agreed to jointly bailout Greece in conjunction with the Euro partners.The board approved Greece’s request for a 30 billion Eurodollar program, and a bilateral financial support of 80 billion Eurodollars that will be available from Euro partners. Talley (2014) notes that many IMF officials said that probably too much of the adjustment burden was placed on the Greek nation while nothing was asked from its European creditors. The end result was there was quite a bit of suffering by the Greek government and the nation as a whole. Could this bailout have been handled better and the results been different if the IMF had followed the rules that were set in place in 2002?

However, in 2009, Greece started to hit the crisis as it is indebted heavily to eurozone countries and become one of three eurozone countries that have gone under two bail-out. Although the Greek economy is relatively small with direct damage of it defaulting on its debts may be soaked up by the eurozone (Financial Times, 2012). The need of financial support from EU and the IMF was requested in 2010 as a loan of 45bn. According to Carmen Reinhart - Co-author of This Time is Different; she believed that it was difficult for Greece to get out of the crisis without restructuring. The problem of the Greek crisis is involved with fiscal problems, which can be income problem, profiling problem, servicing problem or balance sheet problem. As the government took benefit from the growth, they ran a large structural deficit. The restructuring happens more slowly with the support from the EU and IMF, therefore, the private bank from France, Switzerland, etc. which gave a loan to Greece, are not distressed with a huge haircut. As a result, Greece owned the IMF 28bn Euros, the EU 74bn Euros and had a market debt of 262 bn Euros, according to JP Morgan. From 2000 to 2008, the Greek budget deficit was 5.1% as a real number instead of 2.9% of GDP (Marzinotto et al. 2010). In 2009, George Papandreou won the election with his promise of spending more on social causes and trying to reduce the loan that Greece faced. A short time

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

The IMF was in a rush to bail out Russia, as it should have been because Russia's problems were becoming the world's problems. These were very fluid and chaotic times where today's prudent decision is tomorrows bad decision because of unforeseen circumstances. A looming problem that The IMF is asking Russia to solve is asking a communist people to

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

During July 2015 the German parliament opted to approve additional negotiations after recent failures, with it proving to be a move that may have granted Greece a slim lifeline. The new bailout is set to top €86 billion, but it is only being offered in exchange for strict austerity measures. Following his resignation, Mr Varoufakis said