The Story Of Greece Debt Crisis

By rishabh.r2012 - January, 6th 2013

“I think time is against us. I am terrified at the ideas of the problems facing country.”

-Karlos Poprlias

The sentence belongs to a person who has been involved in the development of a country for the past twenty five years. It belongs to none other than the President of the Republic of Hellenic, commonly known to us as Greece. Why?

Why would a president say so even when a country that has touched the skies in almost every sphere of development – a country that has a very good HDI, an interesting per capital income and a culture which makes it the cultural and religious head of the whole Europe? The answer can be told in simple words – ‘Greece Debt Crisis’.

Sources tell that the Greece Debt Crisis started in 2009, but if we look back to finding the root causes, we would be amused to know that these problems had begun no less than twenty years ago. In 1989-1999 periods, Greece faced a high rate of inflation (16.8% annual average) and an average growth of 1.2%. This was the time when it had adopted the EMU membership. Moreover, the planned expenditure of the government was significantly higher than the planned income. It can be inferred that the adoption of Euro added to the fire.

However, the ongoing crisis started in the year 2008 in relation to the Eurozone debt crisis. Greece and other European countries had become a victim of ‘property and real estate bubbles’.  The high level of inflation and increasing in private debt blew up the financial stability of Greece. Interest rate in Greece was as high as 21%. Repaying loans at this rate depicted serious worries about the financial soundness.

It led to economic bailouts and shutdowns at a shocking level. Plenty of money in circulation and in wage rate (required to as a high government deficit) added to the fire. The Greece fell into a debt trap.

It adversely affected the tourism industry of Greece which once contributed 16% of its GDP. Investors had lost all faith in Greece. Ultimately, it was decided that Greece would have to leave Euro otherwise this crisis would take whole of Europe into it. Happy news?! No, because it would further devalue the currency of Greece, making it even harder to pay back the burden.

The government then attempted to change the things. Direct and indirect taxes were increased and pensions were reduced. Peeks and allowance, and the economy began to make money, but it was not acceptable by the public. After all, who wants to get more salary and pay more tax?!

People started leaving the country for better earning and standards of living. All reputation made by the country in the history collapsed in this span of time.

How can Greece have come out of it and made to shine with prosperity and development like before? It can, though, and it took twenty years to make it like that. But how?

I think that Greece must focus on what it still has with it. It is a home to many mythological traces (of Greek Gods & Goddesses) and a number of spots that can attract tourists from all over the world. Tourism can help in the revaluation of currency and also it can help earn foreign exchange simple marketing strategies like discounts on hotel stay, air tickets to Greece can uplift condition in the long run.

Greece is one of the largest producers of marble and olive. So, spreading more awareness about its benefits in the society may push up its demand. It can also help earn a lot of foreign currency in the form of exports and will help restore the faith of foreign investment.

History reveals that Greece has a high quality HDI. This means that people have more dedication towards their work and their ability to innovate. They may have a number of techniques to either adapt themselves to this situation or to come out of it.

Faith must not be lost!

It is said that ‘slow and steady wins the race’, and Greece will emerge out as a winner one day!