Essay About Economy Of Greece And Series Of Harsh Austerity Measures

Grrek Euro Crisis Reaserch Papaer
Greek Euro crisis DraftSince the fall of 2009, the European Union has been battling a slow-moving but unshakable crisis over the massive debts suffered by its weakest economies, such as Greece.  The economy of Greece is the 32nd largest in the world in term of gross domestic product for the year 2010. After it’s entry into the Eurozone in 2000, Greece’s economy was considered to be one of the fastest growing economies in the Eurozone between the years 2000 to 2007, but after about fifteen successive years of economic growth Greece fell into a recession in 2009 that would spark the current economic crisis that would threaten the rest Europe.  Over the span of the past decade, Greece went on a debt binge that came spiraling to an end towards late 2009, triggering a severe economic crisis that endangered not only the recovery of Europe, but also threatened the future of the euro as well. The debt crisis originally emerged when the newly elected Prime Minister George A. Papandreou revealed that before he had taken office the government had covered up the actual size of the country’s ever-inflating deficit, as European finance ministers expressed their concern about the size of the debt.  But the roots of the crisis can be traced back to 2001, after Greece joined the Eurozone. Following the introduction of the euro, Greece was able to borrow due to rock-bottom interest rates that prevailed for much of the past decade. Greece took advantage of this easy money to drive up the borrowing by the country’s consumers and it’s government, which eventually built up $400 billion in debt. By December 2009, Greece’s economy encountered the highest budget deficit and government debt to GDP ratios in the EU, with a budget deficit standing at 15.4% of GDP. Shares fell around the world after ratings agency Fitch cut’s Greece’s long-term debt to BBB+, from their previous A- credit rating. This was the first time in a decade that Greece does not hold an A- rating. That along with rising debt levels led to rising borrowing costs, which initiated the resulting economic crisis. By early 2010 investment banks are accused of helping initiating by using derivatives contracts to disguise how much Greece was actually borrowing. It was discovered the Greece had been paying Goldman Sachs along with many other banks hundreds of millions of dollars since 2001 to have them arrange special transactions meant to hide their actual level of borrowing. Corruption, coupled with issues concerning poor standards tax collection, are widely recognized as both a major cause of the currently troubled economy as well as a major hurdle for Greece to overcome in terms of the country’s debt problem.Since the recession that sent Greece spiraling into an economic crisis, Greece has depended on a three-year bailout package of 110 billion euros ($152.6 billion) granted to them by their wealthier European neighbors in the May of 2010 to rescue Greece and avert meltdown. The price of this bailout package was a series of harsh austerity measures intended to reduce Greece’s tremendous deficit and renew investor confidence. These austerity measures called for a round of taxes and pay cuts that cut the wages their public employees by 10 percent. Anger erupted in Greece at the scale of the cutbacks that Greece was forced to implement, the population expressing their dissatisfaction through angry street protests. The new loans, combined with the effect of the austerity measures demanded of Greek population pushed them into recession and did little to ease their debt burden, their debt load even increased. These series of negotiations, bailouts and austerity packages failed to stop the loss of investor confidence or to renew the growth needed to give struggling countries a way out of their debt traps