The Greek Financial Crisis
Ever since the end of 2009, Greece has been involved in a financial and economic crisis that has been record breaking and shattered world records in terms of its severity and worldwide effects. The Greek government, since the beginning of the crisis, has attempted to take several governmental measures to try and “stop the bleeding,” including economy policy changes, dramatic government spending and budget cuts and the implementation of new taxes for citizens. In addition to this, the government has tried to alter the perceptions of Greek government and economy by the rest of the world in an effort to appear both more liberal and more democratic. Greece has also been working to privatize many previous state-owned corporations in a desperate effort to stabilize the currency and the economy. This paper will address the various actions taken to date by the Greek government to pull the country out of this terrible crisis, and will explore the specific factors that were causation for this horrible financial crisis. It is important to note that certain policies and government actions and their success is merely subject to personal opinion, but financial data and statistics is absolute and cannot be disputed regardless of personal or political beliefs.
In May of 2010, Greece was awarded a 110 billion euro bailout from both the European Union and the International Monetary Fund. This bailout was effective only in the sense that it prevented Greece from defaulting on country debts and loans, which would have had catastrophic ripple effects on not only the Greek and European markets, but on the global markets including the United States and Asian economies. Soon after this bailout was executed, it became evidently clear to both the EU and the IMF that more money would be needed in order for Greece’s survival and for their long road to economic recovery. With that being said, a second bailout worth 109 billion Euro was given to Greece again by the EU and the IMF in late July of 2011. Of course, these bailouts have been the subject of a tremendous volume of worldwide media attention. These bailouts, along with the privatization of corporations, policy changes, capital injections and governmental changes have been implemented in hope that positive progress will be achieved. The media has successfully painted these reforms as containment methods for this huge mess, and as means of ensuring that this infected economy does as little damage as possible to other economies in the world.
Some country-specific economies that are particularly unstable and thus at risk of damage from the Greek crisis are Italy, Ireland, Portugal and Spain. Although the Greek economy has received, by far, the most media attention for economic difficulties, these other four nations are experiencing serious economic problems of their own. It appears that this was a major motivating factor behind the two bailouts, that it is vitally important to contain the damage before it spreads to these other vulnerable nations, something that the European Union simply cannot afford to have happen. In the words of economic experts, “Greece is just the tip of the iceberg,” and that the economies of EU nations are more intertwined and interdependent than we would have hoped. Given that EU countries share the same currency, the Euro, continuously trade with one another, and hold massive debts for one another, this opens the EU as a whole up to tremendous vulnerability. Essentially, if Greece or any other EU nation defaults on debts, this could send the entire EU into a recession and put the banking system as a whole at risk, much like what happened in the United States in 2008. The goal of these capital injections and bailouts is for Greece to remain financially liquid for enough time to pay their outstanding debts as much has possible to neighbor countries, thus reducing the amount of government debts owed and the interconnected pressure on the...
Please join StudyMode to read the full document