|GREECE ECONOMIC CRISIS | |Causes & Implications | | | | |
2.Few facts about Greece3
4.Pictorial representation of Greece Crisis7
5.Government Surplus or deficit since 20018
6.Long term interest rates9
For years, Greece has been spending money it doesn't have. The government there took advantage of the economic good-times to borrow money and spend it on pay-rises for public workers and projects such as the 2004 Olympics. It began to run-up a bigger and bigger deficit (the gap between how much a country brings-in from tax, and what it spends). Athens olympics Greece enjoyed high public spending during the boom years, including an expensive Olympics. After the world economy went bad, Greece suffererd. Banks started to view it as a country that might not be able to manage its money. They worried Greece might eventually fail to pay its loans, and even go bankrupt. To cover the risk, banks started charging Greece more to borrow cash - making the problem even worse. Eventually the government there went looking for help.
It is now borrowing 110 billion euros (£95bn) from other EU countries and the International Monetary Fund. That money is being loaned at a much better rate, but comes with tough conditions. Greece has to promise to cut its budget deficit.
It's those cuts that have led to the riots in Athens
Few facts about Greece
Economy, in European Union: 11th largest
Latest GDP figure: -0.3% (Third quarter of 2009)
Gross debt in 2010, forecast: 125% of GDP
Gross debt in 2007: 94.5% of GDP
Jobless rate: 9.7%
Stocks performance in 2010: -10.5% (to 11 February)
Greece benefited from joining the euro in 2001. But the Greek government went on something of a spending spree and public spending soared.
Now, it is suffering from its huge spending - and widespread tax evasion - as it finds itself unable to cope with its huge debt loads and meet EU deficit rules. Greece's deficit is, at 12.7%, more than four times higher than European rules allow.
From late 2009, fears of a sovereign debt crisis developed among investors concerning some European states, intensifying in early 2010 and thereafter.
On the side of the excessively borrowing states the governments have had problems to finance further budget deficits and service existing high debt levels. This included Eurozone members Greece, Ireland, Italy, Spain and Portugal, and also some non-Eurozone European Union (EU) countries.
Especially in countries where government budget deficits and sovereign debts have increased sharply, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.
While the sovereign debt increases have been most pronounced in only a few eurozone countries, they have become a perceived problem for the area as a whole.
Concern about rising government debt levels across the globe together with a wave of downgrading of European government debt created alarm in financial markets. On 9 May 2010, Europe's Finance...