On May 1998, Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland established the eurozone by fulfilling the necessary conditions for the adoption of the euro as their single currency. During the same period, the members of the Executive Board of the ECB were appointed. Our story begins two years later, when Greece becomes accepted as the 12th member of the eurozone countries.
In the recent past, a number of EU members, including Greece, Ireland, Portugal, Spain and Belgium, shook the global financial markets with their sovereign debt crisis. In this paper, we will primarily focus on financial crisis in Greece, discussing the current situation and exploring the root
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If Greece were a company, there would be no question of debt restructuring, because it would be the only viable solution (Pasetti). Continuing with such a comparison, Greece’s main issue would be the “operating losses” they have incurred. The average multinational corporation could solve this problem by boosting revenues and cutting expenses, both very feasible actions and goals for a company. However, the size of Greece’s deficit, and the fact that it is actually a country, make this usually realistic goal nearly impossible. Consider the idea that “in the business of running a nation, as you cut spending, you take a short-term hit to GDP growth, and therefore revenues (tax receipts),” and this is something Greece cannot afford to do (Pasetti). Greece also has the increasingly difficult task of producing enough money to begin to pay down their debt principle. There are many suggestions as to what Greece can, but unfortunately many of these solutions only present new issues. Continuing with the corporation analogy, the current situation in Greece can be considered a dramatic result of the agency problem. If this is the case, we would consider the government to be the managers and the citizens of the country to be the shareholders. Although all parties, citizens included, took part in the corruption that has resulted in the country’s crisis, the Greek government clearly acted without the long-term well being of the country in mind. In more of an