Greek Debt Crisis: The Greek Debt Crisis

Greece comprises 3.8% of the total of the European Union’s GDP. The Greek debt crisis first started in 2009. This crisis was set off by the sudden lack of confidence among the leaders and some structural weaknesses in the set up of the Greek economy. Doubts about the ability of Greece to meet its debts started to rise. By 2012, the government of Greece had the largest debt default in history. In 2015, the total debt of Greece was 323 billion Euros. Greece is not the first developed country which has failed to make the repayment of an International Monetary Fund’s loan. (Greece debt crisis: Eurozone rejects bailout appeal, 2015)

Earlier, when the talks about settling on a rescue plan concluded, there was a decrease in the fear of crisis. Following

Other countries can also have trouble repaying their debts. This will result in the investors losing confidence in those European countries. (Greece crisis: EU 'nears end' of Greece rescue talks, 2015).Another issue was during the critical deadline of payment of 1.6 billion Euros to the IMF. This was the day the bailout expired. The stock markets were affected due to the fear of non-payment and eventually the exit of Greece from the euro. On July 5th, Mr. Tsipras called for a referendum on the terms of creditors. In reaction to this, stock markets fell in Paris, London, Milan and Frankfurt. Similar trends were seen in Asia. The values of euro also feel by 2% when compared to the dollar. It resulted in the increase of costs of borrowing in Italy and Spain. (Greece debt crisis: Banks to remain shut all week,

It was possible for Greece to fulfil its payment only through aids from the euro zone countries. Most of the money from these aids will only be used to repay existing debts, and not in the process of rebuilding the crushed economy of Greece. These new aids offer a sense of comfort to investors that Greece will not be leaving the euro zone. . (Greece’s Debt Crisis Explained, 2015). The increase in the chances of an end to the Greece economy gave a boost to the stocks of Europe to the US. this in turn sent the value of euro to a seven-week low. Ron Anari of Jersey City was of the view that the settlement made in Greece was having a positive effect on the equity markets. (Jeremy Herron, 2015). It is also considered that the crisis made the stocks of European countries better buys. Still there are reasons for the American investors to be cautious because the increase in the value of the European stocks has not occurred as fast as the decrease in the value of euro against the dollar