SYNOPSIS
Greece has been through the worst economic crises over the last 10 years . Greece’s economic crisis is at the second spot after the Venezuela crisis.
CAUSES
Greece joined the European Union in1981. In 1981 its debt to GDP ratio was 28%. But due to the misuse of money and mismanagement of the government from 1981 to 1999 its debt continued to rise and the country’s debt to GDP ratio reached 97% by 1999.
The European Union also launched the Euro currency in 1999, Greece wanted to be part of the currency and wanted Euro notes to be used in their country . But they were unable to fulfil the Maastricht Criteria . That is , a country’s debt to GDP ratio should be less than 60% if they want to use the euro . They believed otherwise if a country Had a lot of debts they would not be able to handle the euro.
But Greece accepted the euro currency in 2001 as Goldman Sachs is a company. They helped Greece conceal its debt and indulge in hyper-holes , their debt was so high and by fooling the European Union ,they adopted the Euro currency. But it did not have a lot of effect at that time and there was a considerable growth until 2008, GDP per capita kept rising rapidly . The people were very happy. But so was the debt behind the doors . Then came the economic crisis in 2008.
ECONOMIC CRISIS 2008
Although the financial crises had a negative influence on all the countries, it had disastrous effects on Greece because structural problems had existed in its economy before . Furthermore , when the government changed in 2009 the new prime minister revealed that the previous government had been fudging data on a large scale for years .
They said their budget deficit was 6–7% but actually it was crossing 15% . This maligned Greece’s reputation across the world . Investors lost their trust and started withdrawing their investments . In 2010 the credit rating of the country was downgraded. Until 2010, the debts continued to rise and no one was ready to lend any money . As a result the economy began to crash dramatically.
EFFECTS OF THE CRISES
Greece used to be a 300 billion dollar economy in 2010. Its GDP growth rate has been negative for so many years that by 2017 , it fell to be a mere 200 billion dollar economy . Unemployment rate was 60%. In 2019 the rate stands at 40%. The educated people who could afford to leave began to exit the country as they saw no future in the country. Greece was also going through an aging crisis. The fertility rate was already very low. In 2005 , Greece’s population was at its peak at 11 million. In 2019 it fell to 10.5 million. It is estimated that the population will fall to only 8 million by 2050.
REACTION OF THE GOVERNMENT
To improve the economy they slashed the pension and social benefits being given to the people. The government asked for austerity measures . In 2015, people rioted against austerity measures. The European Union did not want Greece’s economy to crash because that would affect the reputation of Euro Currency . Therefore, they made bailout plans . The IMF and European Union gave the first bailout , worth 110 billion Euros to Greece in 2010 and they asked Greece to implement austerity measures. But this bailout failed and it did not help to revive Greece’s economy.
Then in 2012 a second bailout was given and they asked Greece to implement more austerity measures in exchange. By 2015 the residents got so irritated that they voted for an anti austerity party . But by 2016–17 this party too realised that Greece had no other option , they had to implement austerity measures if they wanted to revive their economy.
A third bailout worth 86 billion Euros was provided. The GDP growth rate of Greece’s economy has slightly risen. Greece owes around 280 billion Euros in total to the European Union and IMF in exchange for all these bailouts .
CORONAVIRUS IMPACT
Greece’s economy will contract 7.5 — 10.5% in 2020 due to coronavirus . The quarterly projection by Foundation Of Economic and Industrial Research was a downgrade of the previous forecast of 5%-9% economic contraction made in April. The unemployment rate , the Euro zones highest, is seen rising to 19.3%,20.5% from 17.4 % last year as coronavirus forced many businesses to halt operations , the IOBE said. The FocusEconomics panellists estimate GDP growing 3.2% in 2022. In 2023, the panel estimates the economy expanding 3.5%. The inflation is estimated to reach 8.9% in 2022 and 3.5% in 2023.