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The Financial Crisis in Greece and Its Aftermath

BY: Jo Justin | Category: Finance | Submitted: 2010-03-02 07:07:21
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Article Summary: "The financial crisis in Greece has taken the world by storm. It remains to be seen what happens to the economy of the world because of this crisis..."

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The financial crisis in Greece has been gripping the world economy for the past few months. The fact that there has been an decrease in the number of people who are of the opinion that Greece will come out of this unscathed has made the scene more poignant. Greece has been one of the counties of the European Union that has not been adhering to the various fiscal policies that have been set out for the countries that are part of the European Union. There are various facts that need to be understood if one needs to learn about the present crisis.

The European Union

The European Union has a common currency which is the Euro, but the member countries of the European Union are not having the same financial policies. The reason for this is that each is a different country and it is not possible to have such a uniform policy in all countries. In spite of the varying policies, the Euro has been having strength mainly because of some of the member countries of the European Union that have been very strong financially. These include France, Germany and other countries. Other countries that have been lagging behind are Greece, Portugal and Italy. This has started to cause an undue strain on the Euro at present.

Policies of individual governments:

The various policies of the individual governments are to blame for the present crisis. The Greek government did not have a control over the uncontrolled spending and the borrowing that was happening and is now in a situation where the spending deficit has caused a lack of money in its coffers. This is leading to the bankruptcy of the country unless some other financial institution or country or the European Union bails the country out.

Steps taken by Greek government

There are various steps that have been taken by the Greek government over the past few months to try and defuse the crisis as well as keep the country from getting into turmoil. This has been done by drastically reducing the spending that the country is doing. Other than cutting down the spending, there has been an increase in the sales taxes and various other taxes. This has helped the country to try and redeem itself in the eyes of the European Union and the other countries. It remains to be seen if these efforts are too small too late.

Hindrance to bailout:

In spite of the situation that Greece is in, there are many countries that are within the European Union that are not interested n bailing out their partner. The reasons for this is that it has been stated while forming the European Union that each state will be responsible for their finances and bailouts will not be possible. If a bailout occurs, it has to be with the money that tax payers have paid in other countries that have had austerity measures in their spending. A bailout will also set a precedent for other countries that may ask for one without controlling their spending. This prevents the bailout strategy to occur.

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