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Euro Crisis in terms of the Greek Debt Issue - Research Paper Example

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Euro Crisis in terms of the Greek Debt Issue

This aspect caught the government of Greece unawares because the expenditure that had been made on the defense equipments was so high meaning that the rest of the country’s economy had been under budgeted. The major economic sources that comprised of tourism and the shipping industry were adversely affected by the economic deterioration that had hit all parts of the world. Lack of monetary fund to plan and budget for the governmental and non-governments needs arose in 2010. This caused the government of Greece to request for a loan in late April in the year 2010 from the European Union and International Monetary Fund (IMF) so that it could be able to cater for its needs and the needs of its citizens. Researchers announced few days after the issuing of the loan that the Greek government could not be able to repay the loan thus the investors that have invested in the Greek government and companies risked losing almost half of their investments. This announcement caused fear among the investors, existing and willing investors, and they withdrew from their original plans to avoid further losses. Effects of the crisis of Greece The Greek government had to introduce drastic measures that led to the infliction of high economic standards to the citizens of Greece in May that year. The high cost of living and low-income rates due to high taxes and other governmental requirements made the Greek citizens to have a series of peaceful protests, which later turned into social instability and riots in Greece. The International Monetary Fund in conjunction with European Union intervened and added an additional loan to the Greek government in 2011 on condition that it could regulate the flow of money and economy (James, 2001). In addition, Greece was supposed to come up with a structure of repaying the loan. This structure was to be produced by the Greek government and agreed upon by the International Monetary Fund, European Union and the Greek government. The European Union gave pressure to the prime minister of Greece due to the improper management and governance during his regime and threatened to withdrawal part of the loan that they were supposed to process for the Greek government. This led to George Papandreou step down to give room for an election of a new and focused regime to cover for the damages caused and give room for more external and internal donations and loans. The resigning of the prime minister caused or led to the release of the percent of the loan that had remained and the appointment of an interim prime minister to take control of the debt repayment and proper use of allocated funds. Scholars and economic analysts has been following up the case of the Greek economic break down and that of the European Union and are suggesting a possible break through for the European nations. The economic analysts are suggesting that the Greek government should stop using Euros and bring back its former currency, drachma, as its currency until it stabilizes. However, this would result in a political and economical instability and deterioration (Drazen, 2011). Some scholars argue that the reintroduction of the drachma would result to a more than 50% fall in its value if Greece chose to drop the use of Euro. This would mean that that the Greek government would suffer from high rates of inflation and there are possibilities of riots, military coups and war. In order to avoid this outcome, the ...Show more

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Euro Crisis in terms of the Greek debt issue Name Institution Date Euro Crisis in terms of the Greek debt issue Introduction Greece had experienced a rapid growth in its economy in the year 2000. The economic growth of Greece during this time was regarded to be the fastest growing in Europe (James, 2001)…
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