Greece's Debt Crisis

My country’s most challenging task right now is its economy. As explained in an earlier blog, Greece’s economy has been in a downward trend due to recent government setbacks in which they lied about how much revenue the country was generating in order to stay in the European Union. Unfortunately, this backfired on all of them, as they are on the verge of leaving the European Union, and the World Bank has had to give them major bailouts so the country can barely stay afloat. It will take some major reconstructing and, most likely, more bailouts in order to get the country back into a more stable environment.

                                          CCTV report about Greek's unemployment rates

In fact, according to the New York Times, the four most powerful banks in Greece must raise at least $16 billion in order to balance out the economy. This is before Greece received the two billion dollar bailout in mid-October. This kept Greece clinging to the Eurozone, but many fear that that will change soon. But that bailout came after the International Monetary Fund, the European Central Bank and the European Commission gave out another bailout beforehand, giving a total of about $264 billion dollars. But the bailouts came with a cost. In order for the “troika” to give these bailouts, some rules were put in place. The lenders required deep budget cuts and major tax hikes in order to compensate. The troika also asked that it streamlined its government, which would end tax evasion (basically the reason the country is in this mess in the first place).

But would it necessarily affect all of the Eurozone if Greece decided to make its exit? Well, not so much as it would have earlier, but most of the Eurozone has made preparations since 2010 to allow them a chance to be saved from whatever kind of backlash the fall of Greece’s economy would have on their own. For example, Portugal, Ireland and Spain have all taken steps to prevent the catastrophe from reaching its shores by selling Greek bonds and stocks. By doing this, those countries will be affected a lot less than those who did not take any precautions.

Another reason Greece is in a lot of trouble is because its unemployment rate is above 25% (compare this to the United States’ 5.1%). Part of the budget cuts were major layoffs at businesses, which means the people who were laid off are now sinking to the poverty line. This has a kind of domino effect because if nobody is employed, nobody is getting money, so nobody is spending money and helping stimulate the sinking economy.