Greece Economy : The Economy Over A Period Of Three Years

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.

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:

Before the crisis, in order to be a part of the Eurozone, countries had to have budget deficits less than 3% of their GDP, national debt less than 60% of their GDP, and inflation rates within 1.5-2% of the economy with the lowest inflation rate in the Eurozone. However, these were not strictly enforced, obviously, as Greece got away with it in extreme measures with no penalty. According to Michael W. Bauer and Stefan Becker, due to the crisis, “there have been crucial changes to all procedures that steer national economic and fiscal policies,” and, “it improves the stringency of EU economic policy-making, providing clear timelines and combining ‘hard’ and ‘soft’ measures” (219). In theory, this should significantly improve the system, as the crisis likely never would have happened if the Eurozone qualifications had been strictly enforced.

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 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

In the early-mid 2000s, Greece 's economy was strong and the government took advantage by running a large deficit. As the world economy cooled in the late 2000s, Greece was hit especially hard because its main industries—shipping and tourism—were especially sensitive to changes in the business cycle. As a result, the country 's debt began to pile up rapidly. In early 2010, as concerns about Greece 's national debt grew, policy makers suggested that emergency bailouts might be necessary.

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

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

The most notorious case, Greece, was granted two sums of money: 110 billion and €109 billion, the latter consist of €50 billion from private organizations. Raoul Ruparel states that by 2014, every household will pay about €1450 for Greece’ debt crisis. It may be go higher if the negotiations in view of agreements and targets.

In order to deeply understand the root cause of the debt crisis in Greece, we have to understand not just the economics of Greece but the policies that drove down the economy.

There is a science to it. There are many reasons one may attribute to this. One of them is that after falling into the crisis the weaknesses of the economy gets exposed. These weaknesses may or may not be the reasons for the emanated crisis but surly they now grab the eyeballs. Due to the crisis the policy reforms get speeded up and measures are taken to tackle the weakness. In situations where financial deficit take place austerity measures work. These measures have great impact as the spending of the government reduces the fiscal deficit to huge extent. This is what the Greece policy reforms are working at. During crisis, the measures aim to immediate relief and also long term solutions to current problems. This kind of strategy has a great impact. To provide immediate relief some stress is put on the economy but the long term now looks safe. In the long run when the economy recovers the stress is relieved. This kind of policy reforms was used in America in the last recession. The idea was to print money and inject them into the economy to boost spending; when the economy would recover the policy would be to draw the excess money. The idea here was not a defensive move but more of an aggressive policy reform. It has been seen throughout history that protectionist attitude leads to aggregating the crisis and taking it into deeper zones of trouble while aggressive reforms boost the recovery process. There is a saying- ‘Fortune favours the brave”. Here it holds

As Olivier Blanchard, the chief economist at IMF, described austerity as “damned if you do, damned if you don’t” (Pearlstein, 2012). This argument contradicts Keynesians, who believe in borrowing and spending to stimulate growth. In reality, macroeconomic solution varies with the macroeconomic structure of the economy. Austerity is the solution when economic growth isn’t influenced by government spending, as a spending cut does not significantly harm the economy. Spending cuts should be imposed as gradual as possible in order to allow private sector to adjust. It also depends on austerity measures such as which spending is increased or decreased, what taxes are raised or lowered. In countries such as Greece, debt levels and interest rates were so high on government bonds that it couldn’t borrow and spend their way out (Zettelmeyer, Trebesch and Gulati, 2013). Austerity imposed too quickly can have a backlash, which is certainly the case with Greece. With aggressive tax increases and budget cut measures can consequently lead to an increase in unemployment followed by decrease in spending and investment resulting in the budget deficit to

Greece knew they were in trouble and they had to receive money from an outside source to keep going as a country and also be able to pay back their creditors. However, Greece was unsure of how to. Greece was interested in paying their creditors back but were not interested in all of the austerity cuts the EU wanted Greece to implement because these cuts would upset some of Greece’s citizens. The EU’s top priority from these negotiations was to make sure Greece would reduce the amount of debt they would be taking on each year. The way the EU was going to make this happen was by making sure Greece implemented austerity cuts. The IMF was not really interested in making Greece implement austerity cuts. (IMF and EU

The Greek sovereign debt crisis highlighted issues with government expenditure and revenue spending. Budget deficit figures for 2009 were revised to 15.4% of the nation 's gross domestic product. Greece decided to undertake debt financing and large scale borrowing in the absence of a government surplus. This resulted in debt levels

In 2008, Greece was seriously affected by the subprime mortgage crisis and it was unable to recover from this crisis. In 2009, Greece admitted its budget deficit would be 12.9% of GDP. That 's more than four times the EU 's 3% limit. Afterward, Greece was prevented from borrowing in the financial markets.