Greece Economic Crisis Analysis

The Troika, made up of the International Monetary Fund, European Commissions and the European Central Bank have the most to lose in this debt crisis as they own 78% of Greek debt. With so much to lose we have seen European “bailout” agreements that mostly front the Greek government more money coupled with crippling austerity in an effort to “rebuild” the economy. Austerity discourages growth as it cuts the spending of the government who is by far the biggest spender in the economy. The effects of austerity can be devastating, but the true effects are often hidden beneath the messages we get from mainstream news sources. The stereotype of the Greek people as lazy and tax evading has desensitized the public and has made austerity seem like more of a sensible option. The media messages have made strict austerity measures seem justified and in effect have hegemozined the Greek people.

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,

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.

The Golden Age of Greece is well known for its sculptures, buildings, rulers, and philosophies. Today, modern Greece is known for having economic crisis's as well as political turmoils. Greece's problems began when they joined the European Union. Greek drachma was officially replaced by the euro when they joined. Greece approved the euro in 2001, not knowing what they were getting in to. When the Prime Minister Konstantinos Karamanlis came to power he realized that the budget deficit was not 1.5%, but 8.3%. That outstanding amount greatly hurt the economy. By 2008, Greece's tax collection crumpled and unemployment was at an all time high. Unfortunately, by 2014, 30% of Greek's population did not have a job (Greece Debt Crisis). In contrast, today's Greece is a complete different from the Golden Age. Greek unemployment soared as austerity took its toll.

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.

Other reasons for the Greek crisis lie in the political bankruptcy and leadership failure, which always come before the financial factor that can result in the collapse of the Social Contract that binds the people with their government. Social Contract is an agreement among the members of an organized society or between the governed and the government, defining and limiting the rights and duties of each. An important consideration when analyzing Greece’s problem is that it is suffering from the inability to implement policy, manage public finances, collect taxes, and open its markets to compete in the global environment. The complexity surrounding these issues can create opportunities for corruption that can further undermine the Greek citizen’s confidence in the system. Greece needs to focus on re-establishing the Social Contract between the Greek population and the state which needs to be based on trust and solidarity

As a country Greece always struggled with its finances. In the 1990s, it consistently ran significant budget deficits while using the Drachma (the former currency of Greece). Because of this, Greece joined the European Union in 2001 which was two years later than other nations. After joining the EU, Greece had a time of prosperity. This did not last too long as a financial crash occurred in 2008. This affected other countries in the EU, but Greece was hit the hardest. In the time before joining the EU, if a situation such as this occurred, Greece would print more currency, boosting the economy . However, since the Euro was controlled by the European Central Bank (ECB), this was not an option. Unemployment was soaring all over Greece. This was worse than the unemployment in the United States during the Great Depression . Most affected were the younger adult population. Besides from unemployment, Greece had an issue with uncollected tax receipts. Greece had more tax debts than any other country in the EU.

The involvement of the “troika” i.e European Commission, European Central Bank and International Monetary Fund has helped Greece for two major bailout loan programs but in exchange has been dictating their domestic policies. Policies ranging from tax reforms, they have controlled wage cuts to the changes in regulations of even small domestic products. Failure to comply with Troika members may lead Greece to face a major default and may also lead to Euro exit but on the other hand upholding their policies is crushing the economic growth

In Georgios P. Kouretas and Prodromos Vlamis 's work, The Greek Crisis: Causes and Implications, the authors indentified "at least three key players," which led to Greece 's continued financial crisis (Kouretas and Vlamis, 393). The first and most responsible institution was the Greek government and its feeble political system. Throughout the years, the national government mismanaged the domestic economy to the level that the economy was adding on government debt at a rate faster than any other eurozone nation. Combined with its rapid increase was its debt/GDP ratio was already greater than 100% by the time of the crisis. In order to combat this overspending, Greece implemented tough austerity in both its fiscal and economic policies (in order to lower its budget deficit and debt/GDP ratio) while relying on 110 billion euro package, provided by the EU and IMF, to finance its short-term operations. As a consequence of its large budget deficit, the financial market downgraded Greece 's credit rating to the point that the country had to withdraw from the international bond markets (due to extremely high interest rates). The final major factor lies in the response of both Eurozone governments and the European

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

It is a fact that, despite the reluctant signs of recovery in Greek economy, unemployment rate remains at its highest levels since the beginning of the crisis (27, 2% May 2014).Also Greece has one of the

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.