Greek government-debt crisis

The Greek government-debt crisis happened after the financial crisis of 2007–08. In Greece it is known as The Crisis (Greek: Η Κρίση). It started with sudden reforms and austerity measures. But this made people poor and lose money and land.

The Greek economy is in the longest recession of any advanced capitalist economy to date. It is even longer than the US Great Depression. Many well-educated Greeks left the country.

A trade deficit means that a country is buying more than it produces, so it has to borrow from others. Both the Greek trade deficit and budget deficit rose from below 5% of GDP in 1999 to peak around 15% of GDP in the 2008–2009 periods. Greece was perceived as a higher credit risk alone than it was as a member of the Eurozone. Thus investors felt the EU would help out Greece.

Reports in 2009 of Greek government disorganization increased borrowing costs. Greece could no longer borrow to finance its trade and budget deficits at an affordable cost.

The Great Recession

The Greek crisis was triggered by the Great Recession, which led the budget deficits of several Western nations to reach or exceed 10% of GDP. Greece had high budget deficit (10.2% and 15.1% of GDP in 2008 and 2009, respectively). But at the same time it had high public debt to GDP ratio. Greece appeared to lose control of this ratio, which already reached 127% of GDP in 2009. Being a member of the Eurozone, the country had essentially no autonomous monetary policy flexibility.

Internal factors

In January 2010, the Greek Ministry of Finance published the Stability and Growth Program 2010. The report listed five main causes: poor GDP growth, government debt and deficits, budget compliance and data credibility. Causes found by others included excess government spending, current account deficits, tax avoidance and tax evasion.

Greek Government-debt Crisis Media

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  Greek bonds

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  Greek GDP*

    Real GDP (chained 2010 Euros)

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    Nominal GDP
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  Relative change in unit labour costs, 2000–2017

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  Real unit labour costs: total economy (ratio of compensation per employee to nominal GDP per person employed)

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  European debt to GDP ratios*

    Greece

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    Italy

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    Spain

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    Portugal

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    France

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    Ireland

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    Germany
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  Combined charts of Greece's GDP and debt since 1970; also of deficit since 2000. Absolute terms time series are in current euros. Public deficit (brown) worsened to 10% in 2008, 15% in 2009 and 11% in 2010. As a result, the public debt-to-GDP ratio (red) rose from 109% in 2008 to 146% in 2010.

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  Current account imbalances (1997–2014)

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  Greece's debt percentage since 1977, compared to the average of the Eurozone

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  Protests in Greece during the debt crisis

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  100,000 people protest against the austerity measures in front of parliament building in Athens (29 May 2011).

Bibliography

• Karyotis, Georgios; Gerodimos, Roman (2015), The Politics of Extreme Austerity: Greece in the Eurozone Crisis, Basingstoke: Palgrave Macmillan, ISBN 978-1-137-36922-2
• Blustein, Paul (7 April 2015), Laid Low: The IMF, the Euro Zone and the First Rescue of Greece (PDF), CIGI Papers Series, CIGI, retrieved 18 April 2015.
• Orphanides, Athanasios (19 October 2015), The Euro Area Crisis Five Years After the Original Sin, MIT Sloan Research Paper, MIT Sloan School of Management, SSRN 2676103.
• Schadler, Susan (October 2013), Unsustainable debt and political economy of lending; constraining the IMF's role in sovereign debt crises (PDF), CIGI Papers Series, CIGI, retrieved 19 August 2015.
• Dalakoglou, Dimitris (2012). "The crisis before the crisis". Social Justice. 39 (1): 24–42. Retrieved 11 November 2013.
• Dalakoglou, Dimitris (2014). Crisis-scapes: Athens and Beyond. Athens, Brighton: ESRC. ISBN 978-1-938660-15-3.
• Janssen, Ronald (July 2010). "Greece and the IMF: Who Exactly is Being Saved?" (PDF). Washington, DC: CEPR. Retrieved 11 November 2013. {{cite journal}}: Cite journal requires |journal= (help)
• Pasiouras, Fotios (2012). Greek Banking: From the Pre-Euro Reforms to the Financial Crisis and Beyond. Basingstoke: Palgrave Macmillan. doi:10.1057/9781137271570. ISBN 978-0-230-35608-5.
• Hyppolite, Paul-Adrien (May 2016), Towards a Theory on the Causes of the Greek Depression: An Investigation of National Balance Sheet Data (1997–2014) (PDF), ELIAMEP: Crisis Observatory, retrieved 2 June 2016.
• Takagi, Shinji; et al. (8 July 2016), "The IMF and the Crises in Greece, Ireland, and Portugal: An Evaluation by the Independent Evaluation Office" (PDF), IEO-IMF, Independent Evaluation Office of the International Monetary Fund, archived from the original (PDF) on 3 August 2016.
• Reinhart, Carmen M.; Trebesch, Christoph (2015), The pitfalls of external dependence: Greece, 1829-2015 (PDF), Brookings Papers on Economic Activity, retrieved 26 September 2016.
• Baldwin, Richard; Giavazzi, Francesco, eds. (7 September 2015), The Eurozone Crisis: A Consensus View of the Causes and a Few Possible Solutions, VoxEU, CEPR Press, retrieved 26 September 2016.