Causes, Effects and Solution of Greece Debt Crisis

The Greece Debt Crisis started in 2009, the economy has been in trouble for about 30 years. It started with a massive expansion of the amount of money the government spent within the economy. This continued throughout the next 20 years. The expansion happened because of debt, not a raise in taxes. Eventually, the economy went downhill and it affected the European Union (EU) and Greece itself.

There were a lot of causes that led up to the Greece Debt Crisis. One was that the EU gave the Greek economy a lot of money to improve Greece, also the money was excessively, which means the prices of their goods are going up but currency remained the same.

Many people got their income from the government, which meant the only way they received their money is if the government borrowed from the EU. The economy appeared stable but it really was going horrible for them because of all the debt piling up.

So the EU put a stop to lending money to Greece, which caused Greece to almost hit bankruptcy by 2008.

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Greece also borrowed money from the International Monetary Fund. The IMF is an international organization stationed in Washington, D.C, which helps 188 countries worldwide with making sure they have secure financial stability and prevent poverty. Greece is the first developed country to not pay their loan back from the IMF.

The Greek Debt Crisis affected Greece itself. Greece suffered greatly, with income losses and unemployment. It’s had a lot of effects on the economy with the banks closed and the people being out of money, people couldn’t get their money out of banks.

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Greece wouldn’t depend on the EU for loans and would no longer be tied to them in any way, politically or economically if they were to leave the EU.

Also, Greece would have a chance to rebuild their economy with the leave they will be able to be self governed and free from control. Then on the other hand if Greece left the EU, the EU would have less problems. Greece makes up less than 2% of the EU’s Gross Domestic Product (GDP), so if greece took a leave it wouldn’t have an immediate impact. “If you look at how the stock markets have been affected – it’s really not that bad. The exposure to Greece from individual banks has been limited and although the links to Greek debts for public institutions is strong there are no enterprise’s capacity to meet or liquidity problems.

Another example of someone who thinks the Grexit would not affect the EU is the former Greek finance minister, Stefanos Manos. He states “It might instead scare people in Europe and force them to do more than they were going to do to create more of a union. Beside a banking union, they need some sort of fiscal union. So a Grexit would be a good reason to accelerate the process.” He says it would force the countries in the EU to come together and create some kind of financial union to ensure that a financial crisis doesn’t happen in other countries in the EU.

I feel that Greece should leave the EU because they would have a chance to rebuild their economy independently. They won’t have to depend on the EU for money loans to rebuild, which would mean they will no longer be tied with the eurozone or rely on other countries for assistance. If Greece made a exit, the EU wouldn’t really care because it won’t be badly affected. Both economies would be healthy if Greece left the EU.

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Causes, Effects and Solution of Greece Debt Crisis. (2021, Dec 18). Retrieved from https://studymoose.com/causes-effects-and-solution-of-greece-debt-crisis-essay

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