Greek Crisis - 7685 Words

MACROECONOMICS Greek debt crisis: causes Instructor: Mou Hui Student: Galina Bogdanova JX1208903 Contents Introduction 3 Timeline of the Greek Debt Crisis 4 Causes 8 Internal 8 1. GDP growth rates 8 2. Unrestrained spending 11 3. Greek public debt 12 4. Statistical credibility 14 External Causes of the Greek Crisis 14 Influence on the evaluation of the crisis 15 Impact of the crisis on the countrys macroeconomic indicators 18 Conclusion 22 References 24 Introduction International crisis 2008 has not only exacerbated the Greek economic situation, but has also intensely brought forward the economy’s deeply rooted and chronic weaknesses. The main argument of the paper is that the main cause of†¦show more content†¦Following the entry in the Eurozone the spreads fell to 50 basis points whereas during the period 2002 until the end of 2007 the spreads fell even further ranging from 10 to 30 base points. Unfortunately, the Greek governments of the period 2001-2009 did not take advantage of the low inflation environment and they ran fiscal deficits of 6 per cent of GDP on the average while they also increased the share of the government spending in the economy (Antzoulatos, 2011). Thus, when the negative effects of the 2007-2009 financial turmoil reached the eurozone and worries over the fiscal problems of Greece and other European countries started to emerged then it was made clear that two hidden problems of the Greek economy remained unaddressed were brought to the surface emphatically once again. The tranquil years of 2001-2009 have led the markets to ignore these two fundamental problems of the Greek economy. As Gibson et al. (2012) argue the markets partially made the successive Greek governments to believe that the low interest-rate environment would be a permanent feature of the Greek economy. Their econometric evidence shows that the drastic reduction in interest-rate spreads occurred over the 2001-2009 period were not justified by theShow MoreRelatedGreece : Greek Financial Crisis1838 Words   |  8 Pages156%. The Greek government was encouraged by the European Central Bank and other private banking institutions to undertake loans to fund foreign infrastructure projects like those related to the Olympic Games of 2004. When the financial crisis of 2007-2008 hit Greece the country found their GDP plummet 20% from 2008-2010 and the government’s capacity to repay its creditors had now become significantly reduced. 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