Preview

How Did The Financial Crisis Affect The Greek Economy

Good Essays
Open Document
Open Document
895 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
How Did The Financial Crisis Affect The Greek Economy
The financial crisis that has impacted Greece has taken a heavy affect on the country and the whole of Europe. This Greek crisis also known as the Greek depression started in 2001 when Greece adopted the Euro and became part of the euro zone, which then give Greece easy access to millions of loans at a low interest rate. The Greek government then used the back loans to finance projects such as infrastructures, pensioners and technologies to modernize their country and compete with their new competitors in the Euro zone. But Greece government was guilty of over spending on projects that were not necessary that would bring about inflation. Greece government were thinking that all this debt that they were accumulating would be repaid over the years to come but unfortunately this wasn’t the case, instead Greece would find that they would be in greater debt year after year. Also the Greek government was guilty of understating the books by providing false or incorrect data to European regulators for a number of years. As a consequence high inflation pushed tourist …show more content…
This can happen through the reduction of European consumers who would come to the Caribbean as tourist and occupy the Caribbean as a vacation location. As a result a reduction in tourist to any Caribbean island will lead to reduction in the countries income because of the heavily reliance on tourism. This reduction would be as a result of the raise in the unemployment rate. Another factor that could be affected is the devaluation of the euro and could add pressure to the valuation of the currencies, and making it harder in using interest rates as a tool for inflation control. Finally European countries which help in the process of developing countries in the Caribbean would be reduced. Because of the high debt that the countries would be facing it would be hard to

You May Also Find These Documents Helpful

  • Good Essays

    P5 BTEC Level 3 unit 38

    • 1398 Words
    • 4 Pages

    The first implication that will impact The business is the European Union, which has been in a deep recession this is because consumer demand has fallen, whilst unemployment rates are increasing across the European union. This has caused great concern to global markets as the possibility that Greece may not be able to pay of their outstanding debts, this could result into the them defaulting the Eurozone, however there is some stability but this situation is very delicate because the European Central Bank and also the International monetary fund, have supported loans which have come with strict conditions attached. By Greece defaulting this could spell the end of the euro, which can have a great affect on all economies around the world, this could result into an extension to the current recession because countries could be seen as an uncertainty to pay back, this will increase the borrowing cost and they may even increase to unafthe businessable rates beyond 5%, a consequence loan may dry up leading to countries not importing goods because they can not afthe business this. This would affect The business because consumers would only look to purchase essentials and buying a car would be seen as a luxury.…

    • 1398 Words
    • 4 Pages
    Good Essays
  • Best Essays

    The financial headlines of 2012 were prevalent with the tribulations of the Greek economy. Its problems, in the eyes of many of the other nations of the euro zone, were not only negatively impacting the prosperity of the Greeks, but also the viability of the European Union. The country as a whole requires a major restructuring. Not only are drastic changes needed in financial and economic policies, but the Greeks need to understand their attitude of government entitlements cannot be sustained. The mismanagement of the Greek economy is also evident in its place in the global market community. It has not found the path that a county needs to follow to become an active member of the vibrant, high growth world of globalization.…

    • 2413 Words
    • 10 Pages
    Best Essays
  • Good Essays

    finc415 hw greece

    • 2173 Words
    • 7 Pages

    Greece is not doing well. Some people want to continue using the euro which a currency provided by the European Central Bank while others want to return to the drachma. The drachma is the fiat currency previously issued by the Greek central bank. This is causing a major uproar in Greece. Politically they are also crumbling. The leaders are persistent with rejecting economic policies that would keep Greece in the euro zone. These leaders are doing nothing to actually help the situation. Argentina is also going through a similar struggle financially. It has defaulted on its debt. With a low credit rating, there was no way this country could continue to operate and Greece…

    • 2173 Words
    • 7 Pages
    Good Essays
  • Good Essays

    European Union

    • 478 Words
    • 2 Pages

    Although they tried to build harmony among themselves that is essential for them to avoid violence and helps to bond a strong political relation among each other .However , various level of social and economic growth as well as the change in values ,principles and political situation between members are the chief causes of discord among them. The current discord among European union (EU) which is one of the biggest financial and political union ,could be the regional economic combination which has been hindered the free trade of some countries across the EU. By local economic integration in today’s globalization, contracts among countries in a geographic region to attain economic improvements from the free movement of trade and investment among themselves (Hill, 2013). The Eurozone is obviously having a decline, unless a new wave of crisis. The London Financial Times states that, an 11 billion euro has been originated in the program for saving the Greek economy. The publication conditions that before the end of this year, the governments of the European nations which are the central holders of Greek debts want to allot an average half of that amount to the Greek government. Or else…

    • 478 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    Minsky model

    • 3797 Words
    • 16 Pages

    Since the end of the Great Depression “…financial failure has been more extensive and pervasive” in the 30-year period 1980 to 2010 than at any other time leading up to the present day (p. 7). Four financial crises occurred in this 30-year period. The closest in time of the four financial crises to the present period is the recent liquidity crisis, the so-called Great Recession of 2007 – 2009, beginning in the United States, Great Britain, Spain, Ireland and Iceland. Eventually all of the countries of the Eurozone succumbed to the disequilibria of the Great Recession with the Eurozone’s suffering further intensifying because of the emergence of the so-called Sovereign Debt Crisis, a sub-crisis morphing out of the Great Recession in 2010 and 2011, involving Greece, Portugal, Spain, Italy and Cyprus. The Sovereign Debt Crisis is still ongoing having recently extended itself into calendar year 2013.…

    • 3797 Words
    • 16 Pages
    Powerful Essays
  • Satisfactory Essays

    What determines whether or not a resource is scarce? Why is the concept of scarcity important to the definition of economics?…

    • 505 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Cyprus Financial Crisis

    • 1809 Words
    • 8 Pages

    The root of the crisis lies when Cyprus experienced a terrible recession in 2009 when the country’s economy was diminished by 1.67% including significant reduction in tourism and shipping which obviously caused high unemployment rate (CIA 2013). Since then, the country’s economy worsen and with the 30% decline of the real estate market has put enormous pressure on a rise in non-performing loans of banking system (The World Bank 2013). Therefore, the banks ended up with Greek Private Sector debt of Euro 22 billion and accumulated $120 billion inclusive of $60 billion from Russia according to Jolly and Castle (2012).…

    • 1809 Words
    • 8 Pages
    Powerful Essays
  • Good Essays

    Rome wasn’t built in a day but over many; in time its historical roots have come to symbolize Western civilization’s most admirable human traits and values of the democratic ethos: hard work, sacrifice for the greater good and cooperation. Today, Rome’s neighboring country Greece is called to mind as the democratic ideal’s counterweight: the modern state of Greece has come to symbolize Western culture’s most human failings by way of its financial collapse. Modern-day Greece’s default must be recognized not as some happenstance event occurring overnight, but the cumulative result of a series of complex and interdependent factors. The sovereign nation’s financial collapse was made possible only by the 2007 global financial crisis originating…

    • 835 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    Greece presents a situation worse than the Eurozone and the PIIS. It shows very high unemployment rate together with a low labor productivity. All this leads to a probable situation of poverty or social exclusion relatively bad. Gross savings are very bad and so is the disposable income. This together means that population have very low purchasing power and no considerable deposits in their bank accounts.…

    • 394 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    European Debt Crisis

    • 2361 Words
    • 10 Pages

    The “Greek financial crisis” revolves around the fact that the nation has a high level of debt and accompanied by a high probability of default. The story of the Greek financial crisis obviously coincides with the current global economic crisis; however, the events in Greece are unlike the financial events that have plagued the rest of the world. The story is twofold in that the Greek government is to blame for fraud and their poor financial practices, as well as the ECB for enabling such practices by making the cost of borrowing so low due to Germany and other more stable Eurozone nations.…

    • 2361 Words
    • 10 Pages
    Powerful Essays
  • Best Essays

    The Eurozone crisis

    • 3510 Words
    • 9 Pages

    The Eurozone crisis was not caused by a single factor, it was the result of a compound of errors made by member states in different sectors of the European economy. There are three causes that have been identified as directly leading to the crisis. The problems of competitiveness, debt and the lack of a comprehensive growth model. There are several other causes, but the problems of Greece mirror the problems of the rest of the Eurozone. In order to fully evaluate and understand the causes of the Eurozone, it is necessary to first look at the way Greece’s debt rose to 112.9% of its Gross Domestic Product (GDP) by 2009. This was the first asymmetric shock in the Euro, but it wasn’t seen as cause for concern at the time it was revealed. Another major issue that needs to be evaluated is the blatant ignorance of the rules of the Maastricht treaty rules about deficit spending and sovereign debt. This laid a poor foundation for the financial stability of the European Monetary Union (EMU) and its ability to absorb asymmetric shocks. There are doubts about whether or not Europe is an optimal currency area and what makes an optimal currency area, economists have argued over this for some time. The OCA will be evaluated in more detail in this essay. There are a lot of lessons to be taken away from the Euro Crisis, lessons that could help prevent future crises arising from asymmetric shocks, some of these lessons will be evaluated in this essay. Throughout this essay, references will be made to the Greek debt crisis as a case study for the wider issues in the Euro crisis.…

    • 3510 Words
    • 9 Pages
    Best Essays
  • Satisfactory Essays

    In late 2009, eroding public finances, misreported statistics, and inadequate follow-through on reforms prompted major credit rating agencies to downgrade Greece’s international debt rating, which has led to increased financial instability and a debt crisis. Greek government has approved a three-year reform program that includes cutting government spending, reducing the size of public sector, tackling tax evasion, reforming the health care and pension systems, and improving competitiveness through structural reforms to the labour and product market under the intense pressure by the EU and international lenders. The Greek Government projects that its reform program will achieve a reduction of Greece’s deficit by 4% of GDP in 2010 and allow Greece to decrease the deficit to below 3% by 2012. Greece requested activation of a joint European Union-International…

    • 343 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Paper

    • 3377 Words
    • 14 Pages

    Throughout the civilization of the world many countries have been made. Countries came about along with agreements and disagreements to help one another. These agreements can be known as the Euro zone which is in European countries, or also known as allies in other countries. Many countries have gone through economic struggles along with social problems through the years, but each is different. Each country has a background to consider, along with the aid from others and different events in history that make up the country today. The United States is completely different than a small country in the Middle Eastern countries, while other countries in Europe are completely different. Greece has been known for tourism and economic downturn, but we must consider their history, cultural values, and business.…

    • 3377 Words
    • 14 Pages
    Powerful Essays
  • Good Essays

    Current Event

    • 454 Words
    • 2 Pages

    In this article “Scariest Part of Greek Unemployment: Generational Warfare” by Eric Kuttien, Greece is in a financial collapse. The economy in Greece has worsened leaving its neighbor country Germany as a considerable economy capable of supporting the neighbors around it. Greece’s unemployment hit 25.4% in August (Kuttien 1). The unemployment rate among old Greek people is under 15%. However amongst Middle age Greeks, unemployment has increased to 19.3 percent. The problem facing many Greeks today lies with the young Greeks of Greece. For Greeks under 25 years, the unemployment rate has risen up to 13 percent. People between 25 to 35 unemployment rose by 33%. This is difficult to imagine. How is this happening? Well student are getting out of college but cannot find a job. Many of the older people will not retire because of pension reduction. Due to older worker clinging to their jobs, young graduate student are left to search and this is why Greece has seen an increase in violence in the streets. Cause of the unemployment rate, Greece has cut down their spending by nearly a quarter. This means less consumption and eventually low GDP.…

    • 454 Words
    • 2 Pages
    Good Essays
  • Better Essays

    The Eurozone Crisis

    • 1637 Words
    • 5 Pages

    The Eurozone is a combined group of countries using the euro as their only currency. It was created in 1999 and currently consists of 17 countries – not all part of the European Union (Investor Words). Within the Eurozone, the countries follow a monetary policy and controlled by the European Central Bank (in other words, the ECB controlled the supply of the euro within the 17 countries). In an attempt to control government debt levels and deficit spending the Maastricht Treaty was created. As years passed, some countries government deficit began to rise and increased debt levels. By 2010, Greece (3% of the Eurozone) had public debt around 100% of their GDP. In order to lower their debt levels, the Greek government had increased their taxes and their borrowing levels. Solutions for fixing this issue consisted of stronger countries paying off the Greek debt – however not everyone agreed to such methods. Eventually, the value of the euro went down in the exchange markets and other Eurozone countries such as: Portugal, Italy, Ireland and Spain faced the same problem as Greece. The International Monetary Fund (IMF) and the European Financial Stability Facility (EFSF) donated money to help reduce the amount of debt – however not enough (Krugman, Obstfeld, Melitz, 2011). Since the Eurozone is controlled by monetary rules and does not consist of fiscal union (government collection of tax’s), it has made it harder for countries to recuperate from the crisis. It has been said that this Eurozone crisis is like a currency crisis as they try to preserve the euro from depreciating and losing value. Although, this is an ongoing crisis, there are certain steps the Eurozone can take in order to release the countries from their ongoing debt levels and hopefully reverse the effects on the euro.…

    • 1637 Words
    • 5 Pages
    Better Essays