What is really the problem with Greece?Years of…1. Unrestrained spending2. Cheap lending3. Failure to implement effective financial reform4. Failure to collect taxes a.) citizens b.) officialsHow big are these debts?National debt, put at €300 billion ($413.6 billion), is bigger than the countrys economy, with some estimates predicting it will reach 120 % of GDP in 2010. The countrys deficit –how much more it spends than it takes in – is 12.7 %.
What will happen now?Greeces CURRENT credit rating : rapidly goes…–the assessment of its ability to repay its debts –has been downgraded to the lowest in the euro zone. Meaning it will likely be viewed as a financial black hole by foreign investors.Will this hurt the rest of Europe?Why?1. Trust rates for the euro will substantially decrease.2. Reputation of the euro will have a large scar.3. Could lead to immediate fall against other currencies.
So, What is Greece doing about it?HARSH SPENDING CUTS AND TAX HIKES!Are the people happy? Predictably…. They are not.1. Burning of the national flag.2. Warning of resistance from different sectors.3. Threat of coups.
How are the Greece’s European neighbors helping?The Euro zone have agreed a rescue plan for their ailing member. The package, which would only be offered as a last resort, will involve co-ordinated mutual loans from countries inside the common currency area, as well as funds and technical assistance from the IMF.According to the joined statement on the EU web: a "majority" of the euro zone States would contribute an amount based on their Gross Domestic Product (GDP) and population, "in the event that Greece needed support after failing to access funds in the financial markets."
“A European official familiar with the matter said on Saturday that the reason for such a move—made as a condition of disbursing another round of bailout aid—is "the insufficient progress on Greeces debt reduction, which in part is the result of the countrys extremely decentralized budget process.“ – Germany Pushes for EU Budget Control Over :Wall Street Journal. January 28, 2012"Further progress was made, building on the understandings reached yesterday on the key legal and technical issues. We are close to a finalization of a voluntary [private-sector involvement]…. We expect to conclude next week as discussions on other issues move forward," Charles Dallara and Jean Lemierre, co-chairmen of the institutes steering committee, said in an emailed statement. The private-sector creditors are being led in negotiations by the Washington-based institute.” – Greece Creditors Close to Finalizing Debt Deal: Wall Street Journal. January 28, 2012“The odds that they will be gone from the euro within a few years are very high.” –What happens if Greece leaves the euro? ; Reality Check with Polly Curtis
Sarkozy said : “We cannot stop the Greek to commit suicide, it is better they do it themselves than have Angela Merkel do it.” – Le Monde Diplomatique“After meeting Papandreou last night Merkel said in a common midnight press conference with Sarkozy that the Greek prime minster’s uncoordinated decision “has changed the psychological situation massively”. A presidential advisor called Papandreou’s decision “totally crazy”. -Greek Referendum to be held by 12.04. Eurointelligence, 03.11.11“We respect Greek democracy and Greece’s right to decide on its own future,” said Mr Barroso. “At the same time, we need Greece to demonstrate commitment to the decisions that it has itself subscribed to.” – Le Monde Diplomatique, The Telegraph: EU accused of Athens coup after threat to end payments, by Bruno Waterfield in Brussels“Banks shut their doors. Supermarket shelves empty. The rich stuff their suitcases with dollars and head for the border. The middle classes abandon their offices and join the street protests. The president flees by helicopter from the roof of his palace.” –Eurozone crisis: how grim would bankruptcy be for Greece?