Essay on Greece debt

Submitted By HaleyMackenzie3
Words: 913
Pages: 4

Greece Debt Crisis

Greece started spiraling out of control financially in late 2009, which leaves them where the Europeans are today, debt. Greece government (Parliamentary Republic) relies on borrowed money to balance their books and begins to really get out of hand when credit rating agencies downgraded Greek government to “junk” pushing the cost of borrowing so high that the country effectively overdraft cancelled over night. The general information on Greece would be that the government type is Parliamentary Republic, meaning the supreme legislative power resting with a body of cabinet ministers chosen from and responsible to the legislature or parliament. GDP per capita is 24,000 euros and population of 10.71 million. Compared to Germany with a GDP per capita of 43,741 and a population of 82.5 million. GDP per capita is simply the total GDP divided by the size of the population. Germany is also one of the largest national economies in Europe. Greek people enjoy a high standard living, with big homes, and expensive surroundings and environment. They are considered a very rich culture (Historically as well). July 2007 we experienced the Global Financial Crisis (GFC) otherwise known as the credit crunch, when a loss of confidence by United States investors in and value of sub prime mortgages caused a liquidity crisis. This event is what we think and led to the extreme debt in the European countries. Eurozone countries have kept Greece afloat for the past century. In return France and Germany wanted bailout packages for the price of 240 billion euros. Private sector lenders, swapped 77 billion in Greek debt for new bonds worth as much as 75% less and this turns into tax revenues falling, prices on homes rising, airports closing, strikes and many other extreme changes for the European society. During the Greece debt crisis there was a huge unemployment rate as well and an inflation level of 50%. In early May 2012 voters upended the countries political system in a parliamentary election that saw the crushing defeat of the dominant parties who were blamed for Greece’s collapse. Almost none of the money is going to the Greek government to pay for vital public services. About 19 cents of every euro bailout money makes its way to fund Greece’s overspending. Its now public institutions, which hold a majority of the Greek debt. If Greece were to default it would be the taxpayers who would carry the largest share of the burden. After the debt was issued, firms, wall streets and big businesses were split in half and made big bets on the debt usually with borrowed money as well, coincidentally. They would bet on the percentage of the amount of money they were losing and try to build up their own debt by receiving more borrowed money in the process of trying to raise revenue.

(This is the Greek GDP in percentage, showing how much it fell throughout the years. The GDP had a major downfall in late 2010 from beginning to spend too much money in a short period of time causing the GDP to fall) After Greece adopted the single currency when the public spending increased dramatically. The reason for this was because Greece had ECB central bank to fall back on. (But failed and ended up in debt) At first they had just joined the euro and that was enough to rock the boat but then came on the single currency and made spending soar. The public sector wages rose by about half of what it was before within just 6 years. Tax evasions stampeded the income and they already needed to pay off big debts that were left from the…