The Greek government-debt crisis has seldom seen a break from the public eye since its first bailout loan in 2010. With a sweeping change in political standing, the question now looms as to whether the newly elected Prime Minister, Alexis Tsipras should pull the plug on Greece’s membership in the Eurozone. In the most part, International financial and political institutions such as the International Monetary Fund (IMF) and the European Union (EU) are helping economic recovery in Greece. Through a variety of implemented fiscal and social measures, Greece will ultimately be spared from a detrimental Grexit, seeing a sound economic outcome through means of democratic legitimacy.
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
As the rating agencies: Moody's, S&P, and Fitch continue to downgrade Eurozone debt from France to the PIIGS; the interest costs for government borrowing in Eurozone countries, with Germany excepted, continue to rise, as does the cost for the European Financial Stability Facility (EFSF), a creation of the European Central Bank to provide liquidity. The Eurozone has been under pressure since the global recovery began in 2009-2010 as investors began to see the troubling signs of government overspending and high GDP ratios across the 17 member group. First to this bond vigilante parade was Greece, a member nation
political scientists have argued that the root of Greece’s economic crisis is political. Greece has a
Greece’s financial issues have always been apparent, but now it’s becoming impossible for the government to hide their financial issues.
Greece’s government trying to impose stringent austerity measures such as tax hikes and salary and pension cuts that cause the economy to contract. Besides, the country has given another 6.8 billion euros in July from the European Union,
The sovereign debt crisis in Greece has attained several controversial bailouts which has caused a huge fuss to the Greek citizens and the tension of political instability in negotiation in the Eurozone. This literature review tends to answer 3 main questions as follows: (1) the causes of sovereign debt crisis in Greece, (2) the implication of the crisis currently and (3) the ways of mitigating the
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.
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.
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
Greece has many historical aspects such as the acropolis where many polytheistic worshipers came to worship the Gods, the first Olympics, as well as the first democracy, however one question that the whole world is asking is “will Greece’s debt soon be history”? The prime minister, Alexis Tripras, is unwilling to pay of the billions of euros of its debt. Germany and France has loaned billions of euros and are now trying to create a plan to solve this problem. The International Monetary Fund, European Central Bank and other organizations have declined all of Greece’s request for more loans. Although the majority countries in the world have debt, Greece has been loaned billions of euros from many european countries, the EU, and other international organizations; this is a problem because this country is doing all in its power to accept more grants, unwilling to give the overdue credits back.
According to the World Fact Book, in 2016, even though the public debt of the country is still 179.4% of Greece’s GDP, Greece saw slight improvements in GDP and unemployment. The economy remains stagnant, because of unfinished economic reforms, a massive non-performing loan problem, and ongoing uncertainty regarding the political direction of the country.
Greece, the overloaded with enormous debt, defaulted and could not pay 1.5 billion euros ($ 1.7 billion) to the International Monetary Fund on Monday (June 29). The country stands today in front of two options; either to say ‘yes’ to the bailout plan or reject it and proceed into the unknown. ‘Yes’ vote would mean the Greeks accept the terms of the creditors which require Athens to continue austerity policies, tax increases (especially on the middle and wealthy classes), freeze early retirement programs, accept direct European supervision on its finance; and last but not least pay off the debt and interests to the lenders without delay. ‘Yes’ will open the door for creditors to extend loans and financing to Athens and, thus, solving the problem from the standpoint of the troika (European Central Bank, International Monetary Fund, and the European Commission). But this is a very long term program that requires the Greek people to be very patient and bear with its toughness knowing that their economy is weak, the country’s debt exceeds 312 billion euros (177% of GDP), trade balance suffers constant deficit (-1.8 billion euros in last May), while more than 25% of the labor force is unemployed, and about 40% of Greek young people have no job!
Historically, financial crises have been followed by a wave of governments defaulting on their debt obligations. The global economic history has experienced sovereign debt crisis such as in Latin America during the 80s, in Russia at the end of the 90s and in Argentina in the beginning of the 00s. The European debt crisis is the most significant of its kind that the economic world was seen started from 2010. Financial crises tend to lead to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt, pushing many governments into default. Greece is currently facing such a sovereign debt crisis and Europe’s most indebted country despite
Greece’s case was somewhat peculiar. While the crisis in Europe progressed from banking system crises to sovereign debt crisis, in Greece it happened the other way. In 2010 the Greek government revealed that the deficit of Greece in 2009 had made the public debt no longer viable. The country tried to regain the trustworthiness of the global markets by reducing its expenditures. This didn’t work and the government of George Papandreou, in April 23, 2010, requested the help of the IMF. (Προσφυγή της Ελλάδας στο μηχανισμό στήριξης ανακοίνωσε ο πρωθυπουργός, 2010). Greece was the first country in the euro area to request financial support from the IMF.
3). There have been a number of factors contributing to Greece’s fiscal crisis- both endogenous and exogenous. When focusing on the endogenous causes of the fiscal crisis, “there is no doubt that running consistently widening public deficits in conjunction with declining external competitiveness played a decisive role on the deteriorating fiscal stance of the Greek economy” (Kouretas, Vlamis, 2010, 394). Greece’s deficit has risen to 12.7%, which is more than four times higher than the European rules have allowed (BBC News, 2010, para. 8). On the other hand, the main exogenous implication is the timing of response. “The Eurozone governments failed to give a clear signal indicating their readiness to support Greece, while the Greek fiscal crisis was escalating,” because many EU Member States were unsure of how much assistance they could individually given to a country in financial difficulty (Kouretas, Vlamis, 2010, 396). In addition, Greece has been facing problems with the underground economy, which is also known as the “shadow economy.” The shadow economy focuses on criminal activity, such as drugs sales, smuggling, gambling, etc. and focuses on legal transactions that are conducted in cash and unreported to fiscal or other competent authorities (Katsios, 2006, 62). Greece has been accountable for about 27-30% of the GNP for the underground economies in comparison to various European countries (67). With all these financial issues going on in Greece, there is a
The Greek exit from the European Union “Grexit” was something that was coined in 2012, due the numerous problems they was facing. The problems emerged in the late 90s. When Greece joined the euro it meant that barriers of trade were reduced between member states. However. Greece had higher labour costs relative to other EU countries and this meant that Greece was not competitive in the market. During the early 2000s Greece saw its debt burden continue to grow due to a current account deficit (i.e. demand was higher than the absorption of GDP). Greece debt was large because the country was borrowing to finance its budget deficit.