Greek Debt Crisis

Over the past few years, Greek’s ability to pay its sovereign debt became a major issue facing economies worldwide. The downgrade of Greek debt to “junk bond” status made Greek default seem inevitable, causing alarm to permeate financial markets worldwide. Unsustainable spending by the Greek government through the creation of a “welfare state” in Greece was a principle cause leading to the Greek debt crisis, which affected even the United States’ economy. High-paying public jobs, excessive pensions, and non-prosecution of severe tax evasion all helped produce the “welfare state” that is present in Greek culture. The default on Greek debt would then have a ripple effect, causing uncertainty in Euro zone markets, and eventually would spread to the rest of the world, including the United States.
Over the past few decades Greek culture became accustomed to exceedingly generous government subsidized welfare programs and now expects that these programs will be in place forever. However, these programs produced a large portion of the enormous debt held by the Greek government. Public sector jobs in Greece pay, on average, three times that of private jobs for similar skill levels (Lewis, Boomerang 44). Related, over the past ten years the public wage rate doubled (Malone). Every Greek strives for employment in the public sector because of the liberal benefits distributed to government employees. Greek government jobs are generally held by long-term employees, until retirement. If a job is classified as “arduous”, retirement age is fifty-five for men and fifty for women, with a pension distribution equal to ninety-five percent of his/her final years salary. Examples of “arduous” positions include hair dressers, radio announcers, waiters, musicians (Lewis, Boomerang 46). As stated in Boomerang by Michael Lewis, “The banks didn’t sink the country; the country sank the banks (Lewis, Boomerang 46)”
Hellenic Railways (Greek’s government run rail system) exemplifies the