Christian Debt Recovery

Greece Debt Crisis The Euro

October 20th, 2010 |

Author: Gavin

greece debt crisis the euro

Anatomy of the EU Economic Crisis – The Greek Economy From Annexation Up to the Crash Point

Greece enjoyed one major advantage when it was annexed by the European Union – strength of currency, as she ditched her weak drachmas for the euro. This has led to a cataclysmic chain reaction, more commonly known right now as the EU economic crisis. Let us now discuss, chronologically, how this happened starting from the point when Greece was annexed, up to the time when she crashed.

As soon as Greece got hold of the then-powerful euro, she was then immediately capable of borrowing from foreign sources at interest rates that are comparable to those enjoyed by much stronger EU economies. In essence, Greece was the nerd of the class, but she joined the cheerleading team, so she immediately became cool, even if she’s not.

Now, Greece had so much fun with borrowing money. She spent on her economy even if she doesn’t need to. This is called massive stimulus spending. In simpler terms, she was giving away money to her citizens for free, for so long. The new cheerleader got a credit card with very high credit line and immediately went on a shopping spree, without her knowing how to repay what she borrowed.

Because Greece had very powerful peers, the foreign lenders were not as worried about whether she’s in the red zone or not. After all, the lenders believed that she will be backed by her powerful friends like Germany and France. Thus, this relentless spending continued for many years.

However, disaster struck when the global financial crisis was sparked by the United States subprime mortgage debacle. Economies from all over the world suffered, and one of the first ones to get hit was the European Union, as it had massive holdings in the United States. Hence, the euro weakened.

Foreign debt is denominated in U.S. Dollars. Hence if the euro weakens, it would require Greece to allocate more Euros every year for debt servicing. However, Greece is so broke that it cannot spare even a single cent anymore. The credit collectors stormed her, and she panicked by cheating on accounting reports, only to admit defeat in the end, and ask for a lifeline from the rest of the cheerleading team.

About the Author

After a long day of work, Sammi relaxes by gardening. She plants flowers like chrysanthemums and stakes them up with plant support hoops!

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