Foreign Policy. N.p., 17 May 2012. Web. Economides, Spyros. "Viewpoint: The Politics of Greece's Financial Crisis."
Many European countries suffered the aftermath of the United States’ financial crisis that lasted from 2007 through 2009. Although Greece is the member of the Eurozone that has been in the middle of this ongoing debt crisis since November 2009, Greece has been fighting to stay afloat long before all of this erupted. The effect of the Euro debt crisis made it clear that Greece's excessive budget deficit and mainly its public debt were unsustainable. The crisis caused the interest rates to rise substantially as well as the unemployment rate from the beginning of Euro debt crisis and continuing forward. The gross domestic product declined and the inflation rose as well.
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).
Firstly, the Euro debt crisis is supposed to be the most direct trigger for the recession and bring Euro with severe challenges. The Euro-zone crisis results from a combination of complex factors. Prokopijević(2010)argues that “Fiscal discipline in the euro zone was weak from its creation in 1999, but ongoing economic prosperity limited the damage.”It is not until Greek government revealed its unreal budget data in late 2009 that the euro sovereign debt crisis has been fully aware of. Every member states in euro zone is involved in this debt crisis for being in the same Economic and Monetary Union(EMU) and using the same currency, which indicates that an individual country in euro zone is essentially forfeiting its right to determine how much its currency is worth. (Nowak& Shachmurove,2012)The debt crisis in Greece brings confidential crisis not only to the countries like Greece, Italy and S... ... middle of paper ... ...ic Finance.
The financial crisis from 2007 has caused the greatest global economy recession since the Great Depression and also the European sovereign debt crisis. The consequences and cost are enormous. Due to this fact, explanations and responsibilities for financial crisis are searched so that the role of corporate governance and financial engineering is set on the spotlight. The financial crisis has been said to be a case of financial engineering and corporate governance gone wrong. In this paper I will discuss this statement and demonstrate that wrong financial engineering practice and corporate governance effectively caused, or at least in part, the financial crisis.
Causes The Greece economic crisis has been caused in varying parts and with varying significance by a number of factors. The key reasons for the Greek economic crisis can be identified as – Greece’s entry into the Eurozone in spite of its inherent inadequacies; insufficient tax base and reckless government spending coupled with corruption. Greece officially adopted the Euro and became a part of the Eurozone in 2001. Becoming a member of the Eurozone required countries to meet specific criterion called the Maastricht convergence criteria. However at the time of its admission to the Eurozone, Greece was nowhere close to meeting th... ... middle of paper ... ...an Central Bank, Press and Information Division, 2 January 2001.
Retrieved from http://www.npr.org/ templates/story/story.php?storyId=123595405 Traynor, I. and Wearden, G. (2010, February 11). EU Leaders reach Greek bailout deal. The Guardian. Retrieved from http://www.guardian.co.uk/business/2010/feb/11/ eu-summit-greece-bailout-imf White, A. (2010, February 11).
Greece Lack of economic discipline Greece has been facing the problem of government debt for all the periods of its history since the beginning of 19th century. Economists gear this fact with some inherent features of Greek economy and Greek society such as costly and ineffective government, tax evasion and political clientelism, which is based on relations of patronage. Altogether these drawbacks manifested themselves against the background of the latest global financial crisis, having sharply raised the deficit of Greek government budget. On the eve of the Greek recession, the state authorities allocated large amounts of money to increase salaries, pensions and benefits in the public sector. These measures were designed predominantly to enlist the electoral support and maintain the relations with public sector labor unions.