Greece-crisis and solutions
Greece – Crisis and Solutions
Paper International Economics
Greece - Crisis and Solutions
June 25, 2013
Content
1. Introduction………………………………………………………………………………………………………2
2. Greece joining the Eurozone…...............................................................................3
3. Budget structure that lead to the crisis…………………………………………………………………6
4. Supporting and rescue measures…………………………………………………………………………9
5. Conclusion……………………………………………………………………………………………………….11
6. References……………………………………………............................................................13
1
1. Introduction
In the last years the severe debt crisis of Greece has posed a large challenge to the member states of the Eurozone. It is threatening the stability of the European Monetary
Union (EMU). After having piled up over 300 Billion Euros of debt, in 2010 the market mistrust in Greece dramatically increased, especially as the newly elected government revealed the incorrectness of the financial statistics of previous years. Finally, on the
23rd of April 2010, Greece was threatened by national bankruptcy and requested help of the other Eurozone members and the International Monetary Fund. Although Greece is one of the smaller economies of the Eurozone, its daring default has great effects on the whole community.
Now then, what happen if Greece “Grexit”? The Pros are that a return to the old currency like the Drachma would have the effect of depreciate in value, it would become more competitively in price, what would boost up the Greek exports. The Greek government would also get back the power over its fiscal policy. On the other hand there are many reasons why Greece should not decide to leave the Eurozone. One is that Greece would lose its purchasing power. Today, Greece imports nearly 40 percent of its food, most of its medicine and almost all of its oil and natural gas, a situation that may lead to shortages. The Greek bank system would break down because of
Paper International Economics
Greece - Crisis and Solutions
June 25, 2013
Content
1. Introduction………………………………………………………………………………………………………2
2. Greece joining the Eurozone…...............................................................................3
3. Budget structure that lead to the crisis…………………………………………………………………6
4. Supporting and rescue measures…………………………………………………………………………9
5. Conclusion……………………………………………………………………………………………………….11
6. References……………………………………………............................................................13
1
1. Introduction
In the last years the severe debt crisis of Greece has posed a large challenge to the member states of the Eurozone. It is threatening the stability of the European Monetary
Union (EMU). After having piled up over 300 Billion Euros of debt, in 2010 the market mistrust in Greece dramatically increased, especially as the newly elected government revealed the incorrectness of the financial statistics of previous years. Finally, on the
23rd of April 2010, Greece was threatened by national bankruptcy and requested help of the other Eurozone members and the International Monetary Fund. Although Greece is one of the smaller economies of the Eurozone, its daring default has great effects on the whole community.
Now then, what happen if Greece “Grexit”? The Pros are that a return to the old currency like the Drachma would have the effect of depreciate in value, it would become more competitively in price, what would boost up the Greek exports. The Greek government would also get back the power over its fiscal policy. On the other hand there are many reasons why Greece should not decide to leave the Eurozone. One is that Greece would lose its purchasing power. Today, Greece imports nearly 40 percent of its food, most of its medicine and almost all of its oil and natural gas, a situation that may lead to shortages. The Greek bank system would break down because of