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The Greek Debt Crisis

The Greek Debt Crisis

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Published by wathetimbo
The Greek Debt Crisis - Causes, Implications and Resolution
The Greek Debt Crisis - Causes, Implications and Resolution

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Published by: wathetimbo on Mar 27, 2011
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05/16/2013

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EC6201 
National Economy
 
The Greek Debt Crisis 
The roots of 
Greece’s economic problems extend
deep downinto the recesses of history. After the government dropped thedrachma for the euro in 2001, the economy started to grow byan average of 4% annually, almost twice the European Unionaverage. Interest rates were low, unemployment wasdropping, and trade was at an all-time high. However, thesepromising indicators masked horrible fiscal governance,growing government debt and declining current account balances. Greece was banking on the rapid economic growth tobuild upwards on highly unstable foundations. In 2008, theinevitable happened
the Greek debt crisis.In this research paper, we will be covering the causes, financialrepercussions and social implications of this crisis. We willalso be examining the methods used by the Greek government to rescue the economy. To conclude, we will discuss possibleresolution measures and objectively forecast the future of Greece.
RKTBJTimothy Tan Xin ZhongM11605
 
The Greek Debt Crisis
EC6201 National EconomyTimothy Tan Xin Zhong
1
 
Table of Contents
Introduction
.....................................................................................................................................................................
2
 
Causes
..............................................................................................................................................................................
3
 The Eurozone ...................................................................................................................................................... 3The Tax Evasive Population ................................................................................................................................. 3The Corrupt and Spendthrift Government ......................................................................................................... 4
Economic Growth of Greece
...........................................................................................................................................
6
 
Financial Repercussions
..................................................................................................................................................
7
 Global Panic ......................................................................................................................................................... 7Current Account Deficits ..................................................................................................................................... 8
Social Implications
...........................................................................................................................................................
9
 Unemployment ................................................................................................................................................. 10Bad Business ...................................................................................................................................................... 10Political Instability ............................................................................................................................................. 11Greek Riots ........................................................................................................................................................ 11
Resolution
......................................................................................................................................................................
11
 
Conclusion
......................................................................................................................................................................
12
 
References
.....................................................................................................................................................................
13
 
 
The Greek Debt Crisis
EC6201 National EconomyTimothy Tan Xin Zhong
2
 
Introduction
Greece is a highly developed country with the 27
th
highest GDP and the 22
nd
highest HDI in the world.
According to the World Bank, Greece’s
GDP for fiscal year 2010 was USD 300 billion. Much of this isattributed to the service sector (78%), which includes the public and tourism sector. The second largestslice of pie belongs to the industrial sector, which contributes to 1
8% of Greece’
s GDP.
Greece’s
 agricultural sector contributes a mere 4%, as shown in Figure 1.
GDP by Sector Workforce Makeup
Figure 1: Contribution of various economic sectors to the GDP and to the workforce
 
The workforce makeup is also shown in Figure 1. It is noteworthy to point out that the Hellenic agriculturalsector, though taking up a significant 20% of the entire workforce, only contributes to 4% of the Greek GDP,suggesting vast income inequalities and high GINI coefficients.As of now, the economy of Greece back on track, with appropriate steps being taken by the governmentand the EU to beat the recent financial downturn
. However, the economic situation wasn’t always like this.
Greece has a long history of fiscal trouble, having spent much of the past 2 centuries in default. Prone tofiscal profligacy, government corruption and pandemic tax evasion, her economy is highly unstable and

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