The paper "Greek Crisis: What Are the Options" is a perfect example of a business case study. Greece is the birthplace of modern-day democracy. Today, the country is in an economic crisis owing to the massive debts it has and is unable to pay. The crisis began late 2009, but this year the consequences bit hard. Since 2010, the International Monetary Fund and the European Union have aided the country but the problem seems to be getting worse to a point of citizens leaving the country (Ben, 2015). The International Monetary Fund has taken various actions, the European Union and the international community as a whole to try and resolve this crisis and prevent it from affecting other economies.
The paper sets to address whether it is worthwhile for the European Union to help bail Greece from its current situation and whether Greece should change its domestic economic policies in response to demands from the E. U (East African Union). To understand the situation in Greece, it becomes necessary to know the reasons why the country is in so much debt. There are different reasons for Greece getting itself in its current predicament.
First was the inefficient pension system that made the country to spend 17.5% of its economic output paying pensions. The government also gave generous benefits to its employees. For instance, unmarried daughters would receive their dead father’ s pension, and there were bonuses given to workers who arrived to work on time (Bitzenis et. al 2014). Early retirement also made the government spend quite a chunk of its money paying pensions for people that should be working. Tax evasion, particularly by the country's wealthy class, also led to a lot of funds being lost. Previous bailouts In late 2009, it emerged that the former government had been misreporting on the status of its debt.
There was a crisis in confidence among lenders on the ability of the country to pay up its debt. The crisis was characterised by the widening of bond yield spreads and the credit default swaps insurance cost rose compared to those in other European states (Alderman 2015). By 2010, the country was running bankrupt, which would create another financial crisis. In response to this, the International Monetary Fund, the European Central Bank and the European Commission popularly known as the troika, set out two international bailouts for Greece totalling to 240 billion Euros (Alderman 2015). These bailouts came with harsh conditions.
Austerity terms were tightened requiring deep cuts in the budget and tax increases. Greece would also have to overhaul its economy by eliminating tax evasion, government streamlining and making the country an easier place involve in business activities. The cash was supposed to buy time for the country so that it can stabilize its finances and stop fears on a potential breakup of the European Union (Wiesner, 2014).
The bailouts did help quite a lot, but the economy shrunk by more than a quarter in five years. The unemployment rate rose to 25%, and the youth unemployment stood at 50%. The Bailout money went to pay off loans that the country owed instead of being pumped into the economy. The country’ s debt is still too much, and it’ s difficult for the country to repay it single-handedly. Greece continues to implement broad economic reforms that were brokered by the Prime Minister including the unwinding of capital controls and the recapitalization of banks (Alderman 2015).
The relationship between Greece and many European countries is very fragile, and many European leaders continue to show impatience with the pace and manner at which the country’ s leadership is reacting to the crisis.
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Bitzenis, A. et.al 2014. Reflections on the Greek Sovereign Debt Crisis. London: Cambridge Scolars Publishing.
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Wiesner, C. 2014. The meanings of Europe: Changes and Exchanges of a Contested Concept. London: Routledge