Greece Debit Crysis

Topics: Government debt, Public finance, Tax Pages: 3 (1248 words) Published: July 1, 2013
Greece Debt Crisis (How it happened?)
Greece debt crisis is considered as number one issue in the world economy today. It has been considered as the major impact to the Euro sovereign debt crisis issue. The lack of investor confidence in Greece has made the recovery of this country a bigger challenge that it was before. This issue came as a major form of news on 2nd May 2012 when the rating agency rated the Greek government debt to junk security. This resulted in the bond yields to shoot up more than 110% making it partially impossible for Greece to acquire more capital for its Current account deficit. The European Union and the IMF agreed to give Greece a bailout package, but there is major indicator to show why Greece laded is such a difficult situation in the first place. High public expenditure by the government: The Greece government before joining the European Union already had a high public expenditure resulting in a Fiscal deficit. After joining the Eurozone Greece increased its price and wages increased drastically. There was a lot of tax evasion during this period. This soon spiralled out of control.

(Source: IMF)
GDP growth Rates: The GDP of Greece grew by an average of 4.2% between the year 2000-2007 the growth and after 2007 the GDP growth became negative. The public expenditure for the past 2 decades has been around 45% of the GDP hence putting a greater strain on the Economy of the county’s fiscal plans which all has a deficit. The country faced high inflation and was not backed by the fixed investment resulting in deepening of the deficit. Corruption and Tax evasion: Greece as a county was not eligible to join the European Union as it did not meet up to the standards and the pre-requisites. It was with representing false DATA and accounts to the European Union that Greece gained entry. This enabled Greece to borrow money as it was as dependable as the other countries in the Union. This shows the corruption in the system....
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