Greece Budget Crisis
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Answer the following questions:
What are the major factors leading to the budget crisis in Greece?
How did the Euro play a role in the budget crisis?
What’s the current status of Greece’s budgets?
Greece Budget Crisis
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Greece Budget Crisis
Factors leading to the budget crisis in Greece
Greece, among other European countries, suffered among the worst debt crises in about a century. While measures are slowly being put in place to reverse the effects of the debt crises, various lessons ought to be learned from the experience. In line with this agenda, the following is a description of some of the major factors that led to the occurrence of the debt crisis in Greece.
A widening budgetary deficit
Towards the close of the 20th century, Greece ranked among the highly developing nations. During this period, the debt levels of the country were fairly constant and manageable. However, at the start of the 21st century, the nation’s debt levels were steadily rising at alarming levels. This led to rising levels of deficit such that the country’s GDP could not cope up. This kept growing, with a reported figure of the debt level comprising 15.4% of the Greece’s domestic product (Kouretas & Vlamis, 2010, p. 394). This continuous increase in the deficit of the country is among the major factors that led to the crisis in Greece.
Absence of consolidated financial and economic reporting
The strengthening of economies and trade relations were the reasons for the formation of the Eurozone and the EU. As such, one would expect a strict level of standards with respect to reporting of economic and financial issues. However, the case on the ground was different, as each country carried on with individual standards. Therefore, when there were rising issues over the economic performance of some member states, there was nobody warranted to control the reporting of the issues nor provide fiscal discipline measures (Manessiotis, 2011, pp. 12 – 14). This led to lack of augmented reports between regimes, as well as the widespread misreporting of figures in Greece to cover up the real situation.
Disagreements among EU countries
During the period when Greece needed help and intervention from other EU member states, there were rampant political differences. The attempts by some nations to raise concern over the deteriorating issue found more criticism as to the legality of bailouts by the European Union (Kouretas & Vlamis, 2010, p. 396). The time taken to solve such disputed was crucial and could have saved the looming crisis. In addition, once the debt and economic crises spread to other nations in the Eurozone and the Balkans, there was more disagreement on which regions to aid first.
Deflation of the worsening situation
As observed, a major factor behind the Greek debt crises was the lack of swift action to mitigate the impending crisis. As an internal measure, Greece decided to deflate the figures in various reports of the situation. As an example, the debt levels had to be revised upwards from estimates of 6.5% and reported figures of 12.7% to 15.4% of the GDP in 2009 (Kouretas & Vlamis, 2010, p. 394). The attempted cover-up of the situation only made matter worse as it did not provide the need to fast-track an attempt at a solution.
The role of the Euro in the budget crisis
In an attempt to bail itself out of an impending crisis, Greece sought to acquire private and public debt to stabilize the economy. The increasing private debt within the Eurozone escalated the issue, with the dismal performance of the Euro owing to the global economic crisis in 2008 (New York Times, 2016)…..
Greece Budget Crisis
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