Greek Withdrawal from the Eurozone

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Months of negotiations on extending Greece's cash-for-reforms deal with the eurozone have collapsed, so the Greek bailout ran out on 30 June and Alexis Tsipras's government failed to make a key debt repayment to the IMF. The European Central Bank (ECB) has said it won't extend emergency funding for the banks and there is a growing risk of Greece leaving the single currency. How in the world did it come to this?

Late in 2013 Greece’s public debt was estimated at 171.8 percent of gross domestic product (GDP) (ANSA, 2014), accentuating the Greek debt crisis that has been growing since before the economic crisis of 2008. The fear is that this debt crisis could ultimately have a domino effect throughout the European Union (EU), with similarly high debt to GDP ratios in Italy (132.9 percent), Portugal (128.7 percent), and Ireland (124.8 percent) (ANSA, 2014). The Greek debt crisis, and the international economic response led by Germany, has had an impact on the euro, the Eurozone, the European Union, and other economies in Europe. This paper will evaluate the causes and effects of the debt crisis, and alternatives for the solution to the debt crisis and its after-effects on the Eurozone and the European Union.

Greece’s Commitments to the European Union

Greece was admitted to the European Union in 1981 (European Union, 2014) following ratification of the 1979 Treaty of Accession of the Hellenic Republic (Greece) (1979), and adopted the euro as its currency in 2001 (European Union, 2014). Like every other EU member, the treaty of accession obligates Greece to adhere to the requirements of the EU established by the Treaty of Rome (Treaty establishing the European Economic Community, 1957). However, once a country becomes a member...

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...Organisation for Economic Co-operation and Development (OECD). (2011). Assessment and recommendations. OECD Economic Surveys: Greece, 11-21.

Porok, V. (2011). Global financial and Greece's debt crisis. Zbornik Radova Ekonomskog Fakulteta U Istocnom Sarajevu, 2011(5), 221-230.

Rady, D. A. (2012). Greece debt crisis: Causes, implications and policy options. Academy Of Accounting & Financial Studies Journal, 16(Special), 87-96.

Thomas, R. (2013). Why Europe needs an agreed blueprint for exit from the euro. Financial Management, 42(1), 54-56.

Treaty establishing the European Economic Community. (1957). Luxembourg, Belgium. Retrieved from http://www.cvce.eu/obj/treaty_establishing_the_european_economic_ community_rome_25_march_1957-en-cca6ba28-0bf3-4ce6-8a76-6b0b3252696e.html

van der Veen, M. (2013). Greece and the crisis of Europe: Which way out? Dollars & Sense, 11.

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