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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Many countries in the Europe are in budget deficit, which only happens when the government spending is greater than their revenues. This over time has accumulated more and more debt. If the government are not able to pay back this may lead to default.
The Greek economy has seen a large collapse following the recent worldwide recession. The European Union has expressed concerns for the impact that Greece’s economic collapse will negatively affect other member nations. Greece and the European Union are working to reduce the Greek deficit and to contain the economic crisis to Greece.
Sturzenegger, Federico, and Jeromin Zettelmeyer. Debt defaults and lessons from a decade of crises. MIT press, 2006.
There are many variables that lead the current condition of Greece’s economy. It would seem that joining the euro allowed Greece, until 2008, to catch up and even surpass its richer Eurozone partners, but these gains have been completely wiped out in the years since. The adoption of the euro gave Greece the advantage in loan rates as well as low rates on the euro bond market. These actions gave Greece a boost in consumer spending which led to great economic growth. Between the years of 1997 and 2007, Greece had an outcome of an average 4% gain in GDP growth. Greece as well as its other European neighbors was hit with the financial crisis and the resulting economic slowdown took a toll on Greece’s growth rate, which dropped to 2% in 2008. In 2009 the recession hit and the economy contracted by 2.4% as a result of the crisis and its effects on credit, world trade, and domestic consumption which is Greece’s main source of growth. High growth and low interest rates were doing a great job of covering up fiscal issues and structural weaknesses that were made worse by the financial crisis a...
Cox, He, Mclean, Russel, Tse, Waananen. (2011) . Charting the American Debt Crisis, New York Times- Politics
Monetary Union represents a major step forward in the building of Europe and one of the most ambitious collective projects at the tail-end of this century. All European citizens should be fully aware of the extent of the change taking place, a change which goes far beyond the framework of the financial markets alone. Today’s presentation, which is aimed not at the experts but at the future users of the Euro, that is, all of us, offers an excellent opportunity for highlighting the impact of Euro.
The movement of capital from the European core countries like Germany and France to the peripheral countries such as Greece began to subside. In 2010 the Greek Ministry of Finance published the Stability and Growth Program 2010 which listed GDP growth rates, government deficit, government debt level, budget compliance, and statistical credibility as the five main causes of the government-debt crisis plaguing Greece today, (…). The Greek economy was one of the fastest growing in Europe up to the time of the Great Recession. At the time of the original introduction of the euro in the years ranging from 2000 to 2007 the economy grew at around 4.2% annually. Greece faces lots of issues in its attempts to regain control of the crisis and their shattered economy and each year the crisis deepens and the international community keeps a watchful eye on the nation teetering on the edge of
Michelis, L. (2011). The Greek Debt Crisis: Suggested Solutions and Reforms. The Rimini Centre Economic Analysis (RECEA), Italy.
The Eurozone crisis across Europe can be blamed on the collapsed globalization of finances, international trade imbalances, and the bubble of the property market. For example, Ireland’s banks created a huge housing bubble due to banks lending money to property developers. This action have steered some of the countries in the Euro such as Ireland, Italy and Greece to drive up their sovereign debt relative to their GDP. “Rochet and Tirole use monitoring as a means of triggering correlated crises: if one bank fails, it is assumed that other banks have not properly monitored and general collapsed occurs”. (Allen and Gale, 2000, pp. ...
Eurozone crisis has had huge impacts not only on the economy of the UE but also on the other countries who have economic and financial relations with the members of the union. The reason why we have decided to examine the Eurozone crisis in detail is to have a better understanding of the mechanisms behind this extremely important and complex problem and also to make accurate inferences about the solution alternatives. In our pape...
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.
Padoa-Schioppa, Tommaso. "12 The European Monetary System: A Long-term View." The European Monetary System (1989): 369.
Since 2008 there has been an ongoing financial debt crisis that has affected the majority of the world states. However, the most disastrous economic decreases have been witnessed in the European continent. Therefore, this crisis is widely known as the European Sovereign Debt - Crisis. The aim of this document, however, is to analyze and discern possible policies focusing on providing a set of solutions that may help the Greek government in regards to their financial debt within the larger European crisis. As such the prime focus of the forthcoming analyses and policies will focus on the handling of the Greek government debt and recommended policies. Additionally, the paper will provide the summary of the economic crisis and the implications of the international community (mainly, the European Union and the International Monetary Fund).
The article titled “You Are What You Owe,” centers around the recent gridlock in Washington over the debt ceiling (Mallaby, 2011). The article explores what would have happened had the United States government not come to an agreement on the American debt ceiling. The article also relates the United States crisis to previous counties that have faced this crisis in the past (Mallaby, 2011). The article reports on the finance and economic conditions in 2011 in the United States during the debt crisis (Mallaby, 2011). The article also discusses the American credit and bond strength and government’s securities, as well as the United States federal debt (Mallaby, 2011). The Gross Domestic Product or GDP, for different countries is also discussed in this recent article (Mallaby, 2011). The United States foreign economic relationships are also explored in the article titled, “Yo...
Some of the major questions that are addressed in International Political Economy (IPE) are questions surrounding the debt crisis. Many people want to know how it happened, what made the crisis worse than it originally was, the factors that contributed to worsening it and the plans implemented to improve the situation. To answer this, the role played by Least Developed Countries (LDC) and Developed Countries (DC’s) needs to be evaluated.