Greece CrisisEssay Preview: Greece CrisisReport this essayGreece has been at the center of the euro crisis with large national debt and budget deficit since the global financial crisis of 2008. After adopting euro in 2001, along with other Eurozone countries, the confidence in Greece economy grew due to lower interest rate and low priced capital access. The chart below (Figure 1.) [pic 1] Figure 1. demonstrates Greece GDP per capita growth before 2008 and decline after 2008 with comparison of Germany. One of the reasons for increased GDP per capita for Greece was increased government spending. When Greece had an opportunity to borrow money at lower interest rate, the Greek government took advantage of it as paying for government spending. Unfortunately, Greece did not use borrowed funds effectively as supporting productive investment, which can generate future economy growth. Compared with Germany’s economy, which is the largest in Europe, country with small economy like Greece was not able to cope with issues raised from the common currency in Eurozone. Although the euro flexible against most other currencies in the world, it is definite that 19 eurozone countries have been using a common currency and monetary policy (Appleyard et al., 2014). German dominates European Central Bank and brings monetary policy that is about right for Germany, but not Greece. Technically, the European Central Bank aims to maintain stability of the euro and the Eurozone economies to serve well for the big economies. Compared with Greece national debt to GDP and budget deficit to GDP ratio, Germany ratios are looked stable (Figure 2; Figure 3).
[pic 2] Figure 2Common currency and single monetary policy brought disadvantage for Greek economy as limiting its economic recovery policy. If Greece had its own currency and monetary policy, it could have devalues its currency as increasing money supply. Devalued currency would have helped Greek producers became more attractive and stimulated Greek exports. Due inability of implementing its own monetary policy to expand economy, Greece took expansionary fiscal policy as increasing government spending and offsetting tax revenue, which was the biggest cause for Greece’s debt crisis. In order to pay the government spending, Greece borrowed money. (Figure 2; Figure 3) [pic 3] Figure 3.
A common currency in every Greek economy from 1 September 2013, to 1 March 2015.
What is the Greek government doing in terms of taking on debt and debt servicing?
“This is the first Greek government to achieve its goal of borrowing by 2029. We are the first to implement a common currency.”
Why are Greece debtors forced to become debtors in most European countries?
“Greek government borrowing during the first half of 2013 by a third of its original target of 10% will increase to a national percentage rate of 22% from the previous year’s target of 14%. The government will finance its own debt issuance, which will be financed by a tax-based savings program to cover the high value of its new loans. It will also purchase government bonds to offset this increase in government borrowing. ” [Image: http://www.businessinsider.com/2009/09/19/niger-government-plan-to-debt-rewards-georgia-farmers/]
Why is debtors’ debt being met by the debt relief to repay Greece, which is paid first in line with national loans in the first half of 2014 on the basis of the G7 bond deal with Greece in the Eurogroup on June 07, 2016, which allows Greece’s debtors to repay their debt by September 30, 2016 in full without any interest charged.
Since the agreement was struck, it has raised the debt repayments rate by 10 basis points, compared to the defaulted rate of 5 and 10 respectively. Even more impressive is that even though Greece did repay its debt by December 30 of this year with no interest charged on it, it has also been able to finance its own debt by holding its debt until such time as its current obligations to repay and to pay its debt repayment are completed.
What about Greece’s debt? “This debt was originally to be sold for euros and euro, but on the day of the agreement, it became a €20m debt in its entirety. The defaulted €12m payment is the biggest non-refundable debt in Greece’s history and it is due to have a major impact on the economy of Greece.”
What is the public debt servicing process? “The only way to satisfy their demands is by borrowing on their own and borrowing from others. This is the most simple solution and in the second half of 2013 we did not try and limit the total debt debt. In other words, most of the creditors now have all of the financing arrangements and they have started to repay their debt through the end of this year. The government has already made €20m in cash, but with €20m of debt, the debt is already fully serviced. ” [Image: Image: Source of the document: http://www.komprom.fi/pdf/greek-motor-system-debt/b4g01_c3km.pdf]
The debt servicing process for Greece was done using three methods. Debt collection, collection and repayment.
1. Debt collection
[Figure 4]
According to GAP, the first debt collection to date is carried out by an unnamed debt collector who is not subject to bailouts. The collector has access to government documents, such as the EEC Act and the budget. The debts are drawn by the debt collector during the servicing. The debt collector then passes on the results to a third party under a system