Capital Flows of the Greek Debt Crisis
GE2202: Economy and Space
Research Essay
Capital Flows of the Greek Debt Crisis
Word Count: 1957
Done by:
Ng Hong Qing (A0093512)
Tutorial Group DE4
Introduction
The Greek Debt Crisis (GDC) saw the plunge of a country into one of the worst economic disasters it has experienced. Having historically run budget deficits to finance social benefits and policies, Greece has also incurred fairly high levels of public debt. However, the GDC was not an outcome of domestic problems. Following the global financial crisis in 2008, Greece’s core industries of shipping and tourism (i.e. central pillars of its economy) suffered major drawbacks from a general decline in government and consumer spending globally. The declining GDP meant that Greece was likely unable to finance its debt and eventually forced to default. While the economic situation could be salvaged through the execution of unilateral monetary policies, Greece as a member of the European Union (EU) was constrained by policies set by the European Commission and the European Central Bank (ECB). Hence, Greece approached the ECB for assistance, resulting in a bailout plan formulated with the International Monetary Fund (IMF) and the ECB. To expedite the process of granting the bailout and to draft a long-term sustainable budget policy for Greece, the Troika, consisting of the European Commission, the IMF and the ECB was set up. After lengthy deliberations, a new round of austerity measures was announced and the next day, a loan agreement granting €45 billion to Greece in 2010 (with more funds to be made available later), was struck. Later, two more austerity packages were passed paving the way for Greece to receive additional funds, and opened up the option for the write-down of debt.
While the GDC is fundamentally an economic issue (i.e. caused by a prolonged deficit in the government’s budget), it is also inherently a geographical phenomenon. It is how global finance is in fact geographically organized and
Research Essay
Capital Flows of the Greek Debt Crisis
Word Count: 1957
Done by:
Ng Hong Qing (A0093512)
Tutorial Group DE4
Introduction
The Greek Debt Crisis (GDC) saw the plunge of a country into one of the worst economic disasters it has experienced. Having historically run budget deficits to finance social benefits and policies, Greece has also incurred fairly high levels of public debt. However, the GDC was not an outcome of domestic problems. Following the global financial crisis in 2008, Greece’s core industries of shipping and tourism (i.e. central pillars of its economy) suffered major drawbacks from a general decline in government and consumer spending globally. The declining GDP meant that Greece was likely unable to finance its debt and eventually forced to default. While the economic situation could be salvaged through the execution of unilateral monetary policies, Greece as a member of the European Union (EU) was constrained by policies set by the European Commission and the European Central Bank (ECB). Hence, Greece approached the ECB for assistance, resulting in a bailout plan formulated with the International Monetary Fund (IMF) and the ECB. To expedite the process of granting the bailout and to draft a long-term sustainable budget policy for Greece, the Troika, consisting of the European Commission, the IMF and the ECB was set up. After lengthy deliberations, a new round of austerity measures was announced and the next day, a loan agreement granting €45 billion to Greece in 2010 (with more funds to be made available later), was struck. Later, two more austerity packages were passed paving the way for Greece to receive additional funds, and opened up the option for the write-down of debt.
While the GDC is fundamentally an economic issue (i.e. caused by a prolonged deficit in the government’s budget), it is also inherently a geographical phenomenon. It is how global finance is in fact geographically organized and
References: Clark, G. (2005) Money flows like mercury: The geography of global finance. Geografiska Annaler B pp. 99-112 Clark, G., Dixon, A., Monk, A. (2009). Managing financial risks: from global to local. Oxford University Press. Eurostat. http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ Swyngedouw, E. (1999) Modernity and Hybridity: Nature, Regeneracionismo, and the production of the Spanish waterscape, 1890-1930 Annals of the Association of American Geographers Vol.89(3) pp.443-465. Financial Times Deutschland, Barclays Capital estimated top 40 holders of Greek government bonds, Acrobat File, accessed 23 March 2012, <ww.ftd.de/download/binary/60066336/file_name/bin-pdf-european-rates.pdf> Allen, J. (2011). Topological twists: Power 's shifting geographies. Dialogues in Human Geography, 1(3), pp. 283–298.