The paper "Communication Problems that Plunged Greece into a Public Debt Crisis" is a perfect example of a business case study. Often times, reports have surfaced of how investors, celebrities, and rich businessmen fell into serious debts or cash crunch forcing them to declare a state of bankruptcy. A closer look at this phenomenon would point to one common thing; serious debts. Usually, individuals, financial institutions, government bureaucracies, and markets have to maintain a particular fiscal status and if need some money has to be a borrower. However, there are conditions of borrowing that are normally set by lenders such as interest rates and the repayment period.
At the same time, the borrower has to carefully plan on how the borrowed amount is going to attract revenues through investments or other such activities; otherwise, the cost of borrowing will become a liability pushing the borrower to more financial turmoil. This leads to situations such as bankruptcy mentioned above. Individuals incur higher financial outlays more than revenues. The case study such a similar phenomenon that occurred previously but on a global scale; The Greek economic crisis. In late 2009, Greece plunged into one of the most economic crisis to have been witnessed in her country from which it is yet to fully recover.
A number of factors fuelled Greek's plunge into economic turmoil including global great recession, weaknesses in the economic structure, and a dwindling lenders' confidence. These fears were mainly caused by Greek's government decision to misreport on its inability to meet its debt demands. This was evident from the previous report on debt levels, weak economic activity, high nominal and real interest rates, high inflation, and the deficit of government's account (Manessiotis 2010, p. 4).
About two years ago (2012), Greece was one of the countries (in the developed category) and within the Eurozone to fail in repayment of IMF loans with a debt soared to $353B. It had the highest sovereign debt default besides a very high-risk insurance cost. While this was happening all along, lawmakers and the executive have been at loggerheads in approving and passing austerity measures and economic reforms. Previously, the leaders were in a state of denial partly because of political influence from the electorate who did not see the sense of external aid.
However, their stance has had to change especially with tough EU conditions that demand economic structural changes for Greece to remain as its member. A bail-out program was required though this did not go down well with anti-reforms including most of the Greeks themselves. Actually, government services could not be supported because of a lack of cash. Having looked briefly at circumstances surrounding Greek's debt economic crisis, the following sub-themes are worth exploring to understand the trend of this phenomenon from its onset to the current status. The beginning and root causes of the crisis Kouretas and Vlamis (2010) expound on two categories of causes that saw Greece plunge into fiscal crisis; endogenous and exogenous.
Endogenous factors consist of the structure of the economy, prolonged imbalances of the macroeconomy, and credibility challenges of macroeconomic policies. Exogenous factors are concerned with the effects of recent financial turmoil and the timing of Europe’ s response to the crisis. A widening public deficit coupled with a lack of external competitiveness played a significant role in deteriorating the fiscal status of Greece.
Lack of external competitiveness implies more imports than exports because other global competitors are preferred to you hence lower export volumes. The Greek budget deficit was revised upwards to 15.4% for the year 2009. With a huge public expenditure routine at hand, the government had no option but to borrow consequently increasing the public debt. At the same time, the debt to GDP ratio continued to soar because of the proposed long-term EU rescue package.
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