Greece Economy After Euro Crisis

2261 WordsAug 23, 201310 Pages
GREECE ECONOMY AFTER EURO CRISIS NAME: HARSHITA AGRAWAL CLASS: FYBA ‘C’ ROLL NO.: 325 Introduction Greece is a service sector led economy, which contributes 85%. Industry (12%) and agriculture (3%) are relatively very small. The main industries include tourism and merchant shipping which are more global in nature. Greece as an economy was doing very well until the global economy crashed in 2008 due to “Global Financial Crisis (GFC)”. During the period of 2001- 2007, Greece was one of the high growth economies in the European Union (EU) with nominal Gross Domestic Product (GDP) growing at an average rate of around 7% per annum and real GDP growing at a rate of 4.2% per annum which was more than the growth in EU. The GFC was a…show more content…
In fact, for their political agenda, the governments go over board and start taking excessive debt/loan. In the successive tables, we can see the increased debt levels of a few developed and developing countries, Greece in particular, which took excessive debt. It was the excessive debt which caused the problem in European countries. Excessive debt level is defined as 90% and above of the GDP, by famous economists- Carmen Reinhart and Kenneth Rogoff. However, IMF (International Monetary Fund) has suggested a limit of up to 120% of the GDP. The EU has been more conservative and had prescribed the upper limit of 60% in the normal circumstances. While EU had prescribed the upper limit of 60% as Debt to GDP, it failed to effectively monitor the fiscal data of its members. As we can see from Table 1 above, Greece, during 2000- 2007 consistently had debt to GDP ratio of above 100%. Yet EU did not take any action against Greece. Analysis A few European countries (17) came together to form EU on 1st January 1999 establishing common currency for all the EU nations i.e. Euro. Euro crisis also known as European sovereign debt crisis resulted from a combination of factors, including the globalisation of finance, easy credit conditions during the 2001–2008 period that encouraged high-risk lending and borrowing practices; the GFC which exposed the fiscal weakness and high debts levels of many nations; international trade imbalances; real estate

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