The worrying state of the Greek economy has blanketed the headlines for several months, but for some, the situation is thoroughly confusing. If you feel like you missed the first couple of chapters in the story of this tumultuous period in Greece’s financial affairs, the following guide will provide details on how the country found it’s way to international attention and economic despair.
Greece is well known as a holiday destination, full of sunshine, tavernas, fun and activity. At least, it was. Since the economic implications, the tavernas have closed, the fun and activities have lessened and although it’s still sunny, the atmosphere feels somewhat cold. So how did Greece get themselves in this position?
This wasn’t an overnight occurrence, Greece has been falling further and further into debt and hasn’t shared their struggles with the rest of Europe, leaving them to further decline without the offer of assistance from stronger countries.
Worse still, Greece was not truthful about their situation and communicated themselves as being a strong and steady economy in the European arena.
In 2004, Greece hosted the Olympics and rather than receiving a substantial income that went some way to repairing the crisis, the country spent excessively and plunged themselves into further debt.
In 2010, Europe gave Greece a mammoth bailout to the value of 240 billion euros in the hope that this would pull the country out of their spiralling struggles.
Greece avoided communicating their continuing difficulties right the way through to 2013, when the newly elected president, Georgios Papandreou, finally declared that Greece’s debt was 113% of its GDP (the monetary value of all of the country’s goods and services).
It was only at this point that the world heard of Greece’s troubles and were shocked at the extent to which the country’s economy had deteriorated.
Vorsprung durch bailout
With interest rates on their debts rising to impossible manageable levels, Greece has had no choice but to call upon its European neighbours to help them through their financial crisis. In particular, Greece have turned to Germany, one of the strongest economic forces within the EU and well known for bailing out other nations previously.
However, Germany have demonstrated a strong reluctance to yet again bail out a financial weak neighbour and instead, have placed demands on Greece to work harder at rectifying their own situation. This was generally supported by the rest of Europe, who were astonished at the extent of the troubles following the massive financial support that had been given just a few years previous.
This leaves Greece in a difficult situation. It seems impossible that they will be able to repair their economy and repay their debts on their own, yet the alternative of claiming bankruptcy leads millions of Greeks badly affected. It may be that Greece exits the euro and returns to her previous currency, the Drachma.
Although this may limit financial risks to the rest of Europe, there are concerns that by allowing Greece to exit, commitment to the euro will weaken. Greece’s future is not stable and as yet, it’s difficult to predict the likely outcome for the country. Needless to say, with a basic understanding, following the struggles of this desperate country is bound to gain greater levels of interest.