The Declining Economy of Greece and the Greek Debt Crisis

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The economy in Greece has been dwindling very rapidly in the past few years. Firms, corporations, and other types of businesses have been losing customers and revenue. Although a beautiful country with lots of opportunity, Greece has made successful business owners opt out of their contracts because of bankruptcy. The cloud that hangs over Greece makes people look for new options. Most people are getting into business such as bakeries, and other markets that are booming right now. Millions and millions of blue-collar workers continue to struggle on a daily basis in this time of crisis.

Writers say this is the year for economic boom in Greece, but there are many factors from years past that come into play. These factors are: The political strategy of Greece’s ruling elite relating to economic development in the 20th century, the role of defense spending, and the transformation of the Greek economy.

Just recently, there has been many back and forth arguments between world leaders about the continuous Greek debt problem that has been connected to business owners and private financers and banks debt be taken care of, while at the same time not allowing the Euro to crash tremendously.

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Germany, who was working with Greece for a while, had to write off about 18 billion Euros. They are one of the countries that would rather have Greece default sooner than later. In past history, Greece has defaulted on its debt four times before which means that that the country cannot out compete core capitalisms.

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According to Fousakas’ “The Greek Workshop of Debt and the Failure of the European Project,” Greece was an economy in 2013 that was already entering its fifth year in recession. They had people who were going into work taking about a 45% wage cut. Unemployment was skyrocketing at a high of 26% (par. 7). Greece had been put in an extraordinary economic and political situation due to the practice of clientelism. Clientelism is the winning of votes through the creation of public sector employment, accompanied by wide spread tax evasion and low tax collection rates. People just continued not to pay for years, and they continued to avoid the problem, which allowed them to be put in a situation where their debt crisis is merely fiscal.

Every understanding of the structure of Greece’s economy begins with the defeat of their country in 1922, which stopped the industrial expansion that had been booming at the time. The defeat at this war was related to two disasters that came later. Over a million refugees had left Turkey and moved their way over to Greece, which completely led to disintegration in Greek nationalism and also trade and financial structures of wealthy Greek society. Also, the country was not able to compete with greater Europe, and all the economical advances they had been making.

According to Peter Robbins in the Greek debt crisis, in both Spain and Greece, the supply variable is in a staggering surplus. The wage-lowering and rent-reducing measures are looking like they will decrease inflation throughout those countries, which will likely increase taxes and decrease government spending (par. 14).

All of these refugees, who thought they were escaping, were actually entrapping themselves into a world of poverty. The refugees were completely left winged, so Greece had to find a way to counteract this problem. Being completely liberal, the master at the time Eleftherios Venizelos had sought out to give every person who was impoverished a land to fill in hopes that the impoverished refugees would not commit to communist and socialist practices. This might have made sense to do so everyone was on the same pace politically, but economically this was a dramatic failure waiting to happen. This choice catalogued the only part of the economy that had any chance to compete with the outside world, which took away the agricultural sector through economies of scale and technological development.

According to Fousakas in “The Greek Workshop of Debt and the Failure of the European Project,” after getting through a rough patch in the 1940’s, Greece had an economic boom where they were averaging a growth rate in the GDP annually of about 8%, which was only second to Japan at the time. They decided it would be a good idea to have a mass political protest, in which they recruited a large-scale amount of civil servants. By 1961, the amount of civil servants had risen to about 105,000 people, which was about 1.2 percent of the total population (par. 16). Obviously now, people are starting to rebel and get upset about the sanctions that are being put on people. The economic structures, Greece’s inability to have industrial economies of scale, and a bipartisan strategy, which employed the slaves, were taking a toll on Greece’s growth.

What is remarkable is not the many failures of neo-liberalism over the past fifteen years that pyramided investments on speculative debt to balloon overall global paper capital from a relatively modest sum of $70 trillion in the late 1990s to more than $700 trillion by 2007, but the inability of capitalist governments to extract themselves from its grip.

Greece’s environmental future can be measured using the Genuine Savings Index, or the (GSI). What the GSI does is, it takes the actual rate of savings in an economy, by taking the sum of net national savings plus investment in human capital and then subtracting the depletion of natural resources and pollution damage. A negative GSI means there is a decrease in the total wealth. If Greece were to use economic policies to grow today and protect its environmental resources the next day, then its wealth will most likely go down. Below is a table of the Genuine Savings for Greece from the years 2006-2010.

This table shows that the genuine savings had followed a negative trend, as a negative impact of environmental resource decay. The decline in the GNI will lead to lower gross savings and higher consumption of fixed capital, which leads to a negative balance in the national savings. The economies of Greece will inevitably follow the European Unions growth model, and use tourism and energy the only two places of development that could potentially take Greece out of a recession.

It should come as no surprise that the neo-liberal transformation of the global economy would come to a bad end. Warning signs of its destructive capacity had been in evidence during the US Savings & Loan fiasco of 1987. Then, with the added power of the internet and its global communications revolution, the neo-liberal promotion of unregulated currency trading ricocheted like a shot inside the global banking system, first creating the Asian financial crisis, which led the US government to make a frantic multi-billion dollar midnight rescue of Long-Term Capital Management, and later generating a stock market bubble and the “” bubble, which, when it collapsed in late 1999, added further evidence of the dangers that came from unregulated speculation.

Borrowing is not being granted and there is no cash to pay forth the interest rates to keep shop open had suffocated the economy. Since 2010, the crisis has capsized everything destroying all aspects of life. Everything from human rights, labor conditions, safety and mental health has all been lost. Elderly people are poor, and do not have the healthcare or means to move elsewhere and receive help. They had been putting a poll tax on all buildings that were connected to electricity. This means that over 300,000 households were put on leave from electricity.

But this is not where the problem ends. “Oligarchs, and the very rich, among whom many corrupt politicians, continue to evade taxation,” said Sophia Whitlock in “Greece, The Eurozone Crisis And The Media.” There are over half a million households that lack any working household members. It has even gotten to the point where people are committing suicide. People who cannot afford to pay their bills anymore become homeless. Obviously, this is not the image that Greece wants to put out there for the media, or for themselves in general. Media is very influential through the Internet and they portray the crisis on air as a powerful advancement of neoliberal policies on Greek economy (Kaitatzi Pg. 7).

An existing absence of organization across government agencies is likely to increase under the crisis. Greece accumulated a substantial government debt that amounted to 130% relative to GDP in 2010, to 148% in 2011, and its debt relative to GDP hiked to 177% in 2012 (Robbins par. 13) The remaining sixteen member countries of the Eurozone agreed to contribute to a financial assistance package for Greece in 2010. The Eurozone countries demanded that Greece implement an austerity program along with comprehensive structural reform of its government finances. Two additional bailout plans have followed since without great success. Greece obviously strived for receiving maximum financial assistance for the “price” (effort) it had to pay in terms of austerity measures, while the donor countries had two options to choose from: they could either cooperate in designing a bail-out plan, or they could individually decide how much they were willing to contribute to the Greek financial assistance package and under what conditions. We exclude the possibility that the Eurozone countries would let Greece down, for the risk of the European Union’s disintegration would largely increase and that would be too high a cost for them to pay.

The Greek economy has been affected tremendously by the political role, but defense spending, and one other factor have also intensified them. In 2010, Greece had purchased six warships at a cost of 2.5 billion dollars and also six submarines at 5 billion dollars, which is one of the reasons why Germany and France have the biggest burden of Greece’s debt. It had been one of the largest weaponry importers in the world from the years 2005-2009, and the US and NATO had endorsed it because they wanted to keep the peace between Turkey and Greece. Greece has a very large black market, high corruption scores, and pervasive habits of tax fraud and evasion.

The other factor that has grasped a hold on their economy has been tax evasion. It was not the regular person who was tax evading though. It was an economic elite that acts as a go between for foreign companies in domestic and foreign trade and, in financial markets. It could be the owner of a large import company, or a financier or banker trading insurance generated in the advanced economies. This is known as a comprador. Greek shipping investment, which is also an international force with no base in Greece, plays a big part in the tax invasion story. The exports over imports ratio had dropped by 2010 to 29 %. This had a big part in the impact of Greece being completely out of the European core. So what can Greece do now?

“The budget which the current three-party government presented to Parliament for approval in October 2012 exceeds even the most pessimistic expectations; instead of debt peaking at 168 percent of GDP in 2013, as had been projected in the March 2012 bailout agreement, it is now forecast to reach as high as 190 percent. (Open for Business par. 8).”

There is a long-term strategy that has been put in place since the first bailout in June of 2011. They want to make a budget surplus and avoid the country of Greece’s default within the Eurozone. Technically, this is something that has the ability to be done over time, but socially people believe that is not going to happen. Greek society would not be able to handle another downfall, and if they were to do this, it would be politically dangerous because of integration as stated in previous paragraphs.

The second solution would be to cancel a substantial amount of debt. There is a fund known as the European Financial Stability, which could only be used for the forward movement of their economy. There are many opportunities that they have the option to invest in including the following: manufacturing, new technologies, green projects, organic farming, and small and medium-sized enterprises desperate for finance. The funds are only being used for the bailout of banks on the sideline, which reuses the debt creation problem.

The third and final option that Greece has would be the exit of the Eurozone. They would do this by defaulting, and this would not at all be beneficial for Greece. This may seem like the option that is going to take place. This is no doubt the most radical and, for some, undesirable solution of all. It will not only bring the end of the Eurozone, but it will also damage the entire geo-political balance of power in NATO.

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The Declining Economy of Greece and the Greek Debt Crisis. (2023, Mar 23). Retrieved from

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