Greece Economic Crisis

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.

As of 2014, Greece -along with other nations of the Eurozone- is facing grave sovereign debt issues, which have helped worsen the economic and political aspects of the nation. Some members, like the case of Ireland, Portugal, Spain and the aforementioned Hellenic nation, have unendurable levels of public debt, and have been receiving aid packages from the European Union and International Monetary Fund to avoid default. However, despite these financial aids, the nation still presents economic complications that threaten to affect the country 's payments to its international commitment. Similarly, such loans and other measures taken in order to control the crisis (budget and job cuts, among others, which will be later explained) have provoked violent riots and strikes, leaving the nation in a constant state of unrest.

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

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

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

The IMF and EU have loaned vast sums to the Greek government, aiding in an economic recovery for the nation. These institutions, along with the European Central Bank (ECB) and many other creditors within the EU have set out fiscal and monetary guidelines that will see the loans be of most use to the economy. Through poorly regulated finances, Greece was facing government bankruptcy prior to the 2010 bailout. These funds have not only saved the government, but an entire nation. As of the 27th of April 2015, Greek public debt stood at 320.4 billion euros (€), with a debt-to-GDP ratio of 180.2 percent. Although this figure is astoundingly large, the policies put in place by creditor institutions mean the debt is manageable, and will be reduced significantly over a period of years. Austerity measures

In 2010, the IMF, along with European Central Bank and the then-sixteen members of the European Union, drew up an economic bailout package in the form of €110 billion loan to ‘rescue’ Greece from “sovereign default”—i.e. Greece’s inability to pay back its existent debt. This action was a response to the growing fear of default from (mostly private) investors around the time of the Great Recession and resultant European debt

During the year 2007, Greece maintained its stable economic growth as one of the only EU countries to avoid the negative impact of the global financial crisis. As a result of its marginal exposure to toxic assets and the stimulus plan enacted by the government, Greece was affected only indirectly.

The burden of debt in the European Union, especially in Greece and Ireland, is detrimental to the continent 's economy and people. Not only is it an issue throughout Europe itself, but it has become a dominant issue in global economics as well. As these European governments struggle to get back on their feet, the fate of the euro is clinging for life. It has become clear of the extremely high deficits, some at over 100% GDP, which are attached to several EU countries. This European crisis is a continuation of the global financial crisis, but also an issue which was brought upon themselves, largely by Greece. The Greek government

The divulgence of the genuine Greek monetary circumstance raised genuine questions about the nation 's capability to meet its obligations. The following rating downsizes and steadily climbing premium rates prompted a deterioration of Greece 's right to gain entrance to capital markets that made it significantly more troublesome and in the end incomprehensible for the legislature to refinance itself, creating a down spiral for the Greek economy. So by then, the Government needed to speak to its fellow members of the European Union and IMF for bailout. The bailout, then again, failed to restore market trust in the Greek economy. In addition, it failed to end the contagion of the crisis to other nations of the euro area.

To save the Eurozone countries, the European Central Bank (ECB) stepped out of its traditional role of maintaining price stability, setting key interest rates, and controlling the Euro supply (Alessi, 2012). ECB was the only institution capable of intervening and making decisive decision on how the debt crisis should be handled. However, critiques, like Germany, oppose ECB for getting involved in any fiscal activities. ECB, wanted to be a lender of last resort like the US Federal Bank of Reserve; such as printing money and lend money to countries or buy government bonds to help relieve the debt crisis. This did not happen until 2010 when Greece really was in deep trouble. The former president Jean-Claude Trichet and the ECB finally initiated a Securities Market Program; in which the ECB started purchasing the Greek’s government bonds on

In late 2000 due to financial crisis the Greece largest industries, tourism and shipping, were badly affected. The Greece had joined the group knowing that it would be easier for it to get the debt with a globally strong currency Euro. The Greeks continued lavish spending (events like Athens Olympic which are reported to cost Greece several times more than the estimated cost, public care) combined with long following trade deficits and large tax evading population lead the Greece budget deficit and public debt to rise to insurmountable amount. And now, the deficit percentage and the debt to GDP ratio for the Greece are highest among

Greece became the focal point of Europe’s debt crisis after the financial collapse in 2008. With global financial markets still reeling, it was announced in 2009 that Greece had been understating its deficit figures for some years, raising soundness about the unassailability of Greek finances. By 2010, Greece was heading towards bankruptcy, which threatened to start out a new financial crisis.

European power of control authorized about 7.5 billion, or $8.4 billion euros in bailout money for Greece. The bailout money is allowing Greece to pay their monthly bills, which came at the prefect time. This is because Europe has been dealing with the influx of migrants and continuing terrorist threats. Germany has also come into play with this problem because they believe that Greece still cannot make their budget. A solution has been reached for Greece’s creditors to commit to debt relief, through 2018. Europe’s crisis has really shown how nations will come together to protect their own. In the Europe Union, most of the decision-making involves politics. They have 28 national governments’, where each one includes voters and tax payers. This has also caused much tension since January 1999, when the euro was introduced. This had caused 19 nations to use a single currency, but allows each country to control budget and tax policies. Some minor solutions that international banks and foreign investors have taken were to sell their Greek bonds and other holdings. They did this so that they would no longer be vulnerable to what happens in Greece.

At one point in time Europe operated as a zone of trade barriers which made doing trade beyond the border basically impossible. However, this all changed when World War II absolutely overcame Europe. Europe now had to find a way to rebuild even if it meant getting rid of the trade barriers. Other countries began to come on board because getting rid of the barriers required a minimal cost of doing trade, which ultimately became the