- The Greek debt crisis is the result of the government’s excessive spending practices.
- Greece’s financial status was stable when it joined the EU in the early 1980s, but it rapidly deteriorated during the next three decades.
- From 2001 to 2008, the economy grew at a rapid pace, backed by increased expenditure and rising debt levels.
Why is Greece’s economy so bad?
Greece’s fiscal troubles were rooted in a lack of revenue. Greece’s social spending expenditures as a proportion of GDP were 10.3 percent in 1980, 19.3 percent in 2000, and 23.5 percent in 2011, whereas Germany’s social spending expenditures were 22.1 percent, 26.6 percent, and 26.2 percent, respectively, over the same decades. In 2011, Greece’s social expenditure fell below the EU average of 24.9 percent.
The paucity of revenue was mostly due to systemic tax avoidance. Self-employed and richer workers, on average, under-reported income while over-reporting debt payments. The frequency of this behavior indicates that it was more of a social standard that was not addressed in time, rather than a behind-the-scenes issue.
Is Greece paying off its debt?
After years of wrangling over the problem, the euro zone awarded Greece new debt relief measures this week. The debt settlement has been declared a success by both Europe and Greece.
Does Greece have the most debt?
Greece’s debt-to-GDP ratio is 210 percent, according to the latest figures from the International Monetary Fund. The country is now ranked third in the world, behind Japan (257 percent) and Sudan (212 percent).
How is Greece doing financially?
Following a routine IMF staff visit to Greece, the predictions imply a minor reduction in the fund’s prior 3.8 percent forecast for 2021, but an increase in the previous 5 percent forecast for the following year.
The expectations are significantly lower than Greece’s own forecasts of 3.6 percent growth this year and 6.2 percent growth in 2022, which follow an 8.2 percent drop in Greek GDP in 2020.
Officials from the International Monetary Fund praised Greece’s “rapid and proactive” reaction to the COVID issue, which saw the government spend 24 billion euros last year and set aside another 11.6 billion euros this year to help businesses and jobs affected by the pandemic.
However, it warned that the prognosis was clouded by uncertainty, and that much would rely on how the pandemic unfolded and its impact on banks’ bad debt holdings, as well as how well EU funds were absorbed.
Greece is set to get 32 billion euros in grants and low-interest loans from the EU’s recovery fund in 2018, after exiting its third bailout in a decade. It predicts a steady return of its key tourism business this year, with arrivals 50 percent higher than in 2020, when demand plummeted.
The IMF delegation recommended that the government focus its efforts on measures to strengthen the economy and jobs, rather than on structural labor market and tax reforms.
It gave “limited support” to keeping the fiscal stance looser next year, adding that “medium-term fiscal sustainability targets should not be at the expense of growth.”
It stated that Greece’s public debt, which stands at over 200 percent of GDP, is manageable in the medium term if the government progressively returns to a primary budget surplus and interest rates remain low. (James Mackenzie contributed reporting, and Christina Fincher edited the piece.)
Will the Greek economy ever recover?
According to a draft budget plan published in Parliament on Monday, the Greek economy is expected to recover all losses experienced in 2020 in the fourth quarter of 2022, with the country’s real GDP exceeding the 2019 level by 1.7 percent by the end of 2022.
After falling by 8.2 percent in 2020, the Greek economy is expected to grow by 6.1 percent this year and 4.5 percent in 2022. After decreasing by 5.2 percent in 2020, private consumption is expected to climb 2.9 percent this year and grow by 2.9 percent in 2022.
As the government gradually lifts support measures, public consumption is predicted to rise by 4.1 percent this year and fall by 2.8 percent in 2022, after rising by 2.7 percent in 2020.
Private investments, which declined 0.6 percent last year, are expected to increase by 11.1 percent this year and by 23.4 percent in 2022, thanks to monies from the Recovery Fund.
Goods and service exports declined 21.7 percent in 2020, but are predicted to increase 14 percent this year and 11.1 percent in 2022.
After declining by 6.8% in 2020, Greek imports are expected to recover 6.6 percent this year and 8.9 percent in 2022.
From 16.3 percent in 2020, unemployment is expected to drop to 16 percent this year and 14.3 percent in 2022.
According to the draft budget plan, without taking leverage into consideration, the National Recovery and Resilience Plan is estimated to add 2.9 percentage points to GDP in 2022, while a gradual return to normalcy based on the immunization program will provide additional economic advantages.
A return to normalcy is predicted to aid in the stabilization of fiscal data and help the tourism sector’s further recovery, with travel receipts expected to increase by 60% by 2021.
The draft budget also anticipates the execution of specific long-term developmental initiatives aimed at improving the investment environment and increasing household income to help the economy recover.
Private consumption (2.9 percent), investments (23.4 percent), service exports (21 percent), and employment (2.7 percent) are forecast to drive real Greek GDP growth in 2022, compared to 2021. Inflation is expected to be 0.8 percent in 2022.
The Greek GDP is predicted to expand by 6.1 percent in 2021, recouping 68.1 percent of losses experienced in 2020, according to the draft budget plan.
What country has the highest debt?
What countries have the world’s largest debt? The top 10 countries with the largest national debt are listed below:
With a population of 127,185,332, Japan holds the world’s biggest national debt, accounting for 234.18 percent of GDP, followed by Greece (181.78 percent). The national debt of Japan is presently $1,028 trillion ($9.087 trillion USD). After Japan’s stock market plummeted, the government bailed out banks and insurance businesses by providing low-interest loans. After a period of time, banking institutions had to be consolidated and nationalized, and other fiscal stimulus measures were implemented to help the faltering economy get back on track. Unfortunately, these initiatives resulted in a massive increase in Japan’s debt.
The national debt of China now stands at 54.44 percent of GDP, up from 41.54 percent in 2014. China’s national debt currently stands at more than 38 trillion yuan ($5 trillion USD). According to a 2015 assessment by the International Monetary Fund, China’s debt is comparatively modest, and many economists have rejected concerns about the debt’s size, both overall and in relation to China’s GDP. With a population of 1,415,045,928 people, China currently possesses the world’s greatest economy and population.
At 19.48 percent of GDP, Russia has one of the lowest debt ratios in the world. Russia is the world’s tenth least indebted country. The overall debt of Russia is currently about 14 billion y ($216 billion USD). The majority of Russia’s external debt is held by private companies.
The national debt of Canada is currently 83.81 percent of GDP. The national debt of Canada is presently over $1.2 trillion CAD ($925 billion USD). Following the 1990s, Canada’s debt decreased gradually until 2010, when it began to rise again.
Germany’s debt to GDP ratio is at 59.81 percent. The entire debt of Germany is estimated to be around 2.291 trillion ($2.527 trillion USD). Germany has the largest economy in Europe.
Is Greece a poor country?
Poverty has risen dramatically in Greece during the previous decade. More than one-fifth of Greeks are unable to pay rent, energy, or bank loans due to a 30% drop in income. Over a third of Greece’s 10-million-strong population lives in poverty as a result of the country’s financial crisis.
Is Greece burning?
Wildfires have raged in Greece for the third week, and there appears to be no end in sight to this disaster-plagued summer. Attica is on fire once more, this time in the southeast, with fires raging near Sounio and in Vilia, northwest of Athens.
Firefighters are battling a 20-kilometer-long fire front. People are fleeing their houses once more, and many are concerned that this may have a negative impact on the environment and air quality in Athens, the capital city.
Over 58 big flames erupted across Greece in the last month, devastating a quarter-million acres of forest. The number of fires this year is 26% higher than the prior 12 years’ average, but the area burned is 450 percent larger, fitting a pattern of destruction that is already visible across the Mediterranean region.
For a week in August, the northern part of Evia island became a display of global climate breakdown, as about a quarter of the island burnt. However, the scale of the devastation cannot be linked solely to the climate catastrophe.
Due to a lack of a preventative plan, the Greek civil protection authorities were unable to appropriately respond to the situation. Forest protection services were also underfunded, resulting in limited operating capability during the wildfires.
Prime Minister Kyriakos Mitsotakis blamed the accident on climate change, acknowledged government incompetence, and apologized, but defended his government’s approach, claiming that Greece had now gained a competitive advantage “Evacuation culture.”
Mitsotakis encouraged people to keep their spirits up, promising relief and a brighter future “In this calamity, there is a “opportunity.” However, for many Greeks, his government’s policies have exacerbated the problem, and no rescue package will be able to restore living to pre-crisis levels, particularly in rural areas such as northern Evia.
Many people in Evia and Attica saw their homes and businesses burn to the ground with no one to defend them. Residents and municipal officials complained that aerial help and firefighters were missing from the battle, which was widely reported in the Greek media.
Every summer, forest fires rage across Greece. So what went wrong with the administration’s response? What went wrong with Greece’s civil protection plan?
‘Culture of evacuations’
Mati, a coastal resort and exurb of Athens, was burnt by a wildfire on July 23, 2018, killing 103 people, a grim reminder of the types of events that the climate crisis may and will inflict on Greece. It was the first time that a local occurrence directly tied to the climate catastrophe had an impact on daily life.
Thousands of automobiles, residences, and trees were destroyed by fire. According to a research conducted by the University of Athens, the disaster in Mati was a once-in-a-lifetime occurrence: wind gusts of 120 kilometers per hour created a firestorm that swept out everything in its path in less than two hours.
Despite their best efforts, residents and visitors were unable to flee the region due to the chaotic and unplanned urban environment. Operational mismanagement and a corrupt local administration had allowed a maze of unauthorized structures to emerge, making it difficult to navigate.
The analogy with Mati was obvious when fires broke out near the district of Varibobi on the outskirts of Athens in August. A flame threatened a residential area where unlawful building had been going on for years and where there was no effective protection plan in place.
Ordering people to abandon their homes without dispatching enough firefighting forces, on the other hand, causes the fire to flare up and consume everything in its path not just the forest, but all social and economic life as well. Northern Evia had many ancient trees in its woodlands.
Locals lived in harmony with nature because their livelihoods were dependent on forest health. Honey and pine resin were key exports from the island.
As a result, several residents resisted evacuation instructions and, in some cases, were able to defend and save their homes from the fire.
Volunteers in the Evian settlement of Kamatriades, for example, conducted coordinated action to combat the wildfires. A 19-year-old described how he and his pals confronted the fire with their friends to defend Pefki, a small village in the northern portion of Evia island, in a viral media report. “If I don’t defend my community, I’ll have no alternative but to flee to the city and look for work,” the young guy explained.
Government failures
This conflagration and the COVID-19 outbreak have taught us a lot. When COVID-19 struck the Greek public health system, which had been decimated by a decade of austerity and budget cuts, the government reacted quickly by shutting down all social activity, a measure that was initially effective but proved to be problematic in the long run, as it harmed the economy, circumvented constitutional rights, and even harmed public health in some ways.
The response to this summer’s megafires was similar. Evacuations saved lives but did not prevent the country’s worst ecological disaster in decades, which will certainly have far-reaching socioeconomic consequences.
The government has focused on hiring police personnel and updating the police vehicle fleet during the last two years, but has paid less attention to other civil protection agencies, resulting in a weakness that was exposed this summer.
The most crucial purpose of the European emergency number 112 was achieved: lives were saved. Many people, however, saw the “culture of evacuations” as an unacceptable surrender to nature’s forces.
Following the 2018 disaster, Prime Minister Alexis Tsipras’ government convened an international commission led by Johann Goldammer, a fire specialist and the director of the Global Fire Monitoring Center, to develop a new public protection strategy, with the support of all major parties at the time.
One of the group’s primary conclusions was that fire protection should be overseen by an independent authority or a coordination committee that would bring together all other services, local governments, and volunteers for effective wildfire prevention.
In Portugal, a version of this plan was applied to reduce wildfire-affected areas. Mitsotakis’ conservative administration may have preserved operational continuity in the police and fire services after the Mati disaster, but it created an administrative and political chasm by delaying key projects like the forest map register and cadaster and neglecting the Goldammer plan.
On August 12, the prime minister stated that civil protection and security are government obligations that should not be delegated to an independent agency, notwithstanding the Goldammer committee’s core strategic recommendation.
Executive state
Nature is reduced to territory for economic development for most conservatives, while environmental protection is seen as an externality.
In this vein, Mitsotakis declared the current fires to be a “unprecedented natural onslaught” and proposed a boost in civil protection services thanks to considerable European Recovery Plan financing. He insisted on the so-called “executive” state’s contemporary theory of civil protection, in which power is centralized in the prime minister’s office.
Mitsotakis also proposed a relief package, a regeneration plan, and a new master plan for Evia’s touristic growth, which involves the “adoption” of woods by associations or private enterprises who will conduct speedy reforestation operations as part of their social responsibility plans.
However, this package would only handle the short-term economic impact of the fires, which the government is concerned about, particularly since Moody’s Investors Service published a report on Greece’s economic vulnerability in the face of climate change.
However, a long-term strategy for mitigating climate change effects appears to be lacking.
That’s hardly unexpected, given that Mitsotakis’ government has moved faster than any other in the past on projects that could harm the environment and local communities.
The government passed a bill last year that “reduces bureaucracy” for energy projects in protected areas. Greenpeace and the WWF have criticized the bill for reducing environmental safeguards and constraints.
The prime minister stated a year ago during a visit to the Greek island of Corfu to open a huge hotel project in the Natura 2000 protected Erimitis habitat that it would be better to construct on the protected area because “it will eventually burn.”
When challenged about this on television, Adonis Georgiadis, the minister of economic development, wondered aloud whether a beautiful forest is better to a forest that is beneficial to the local city’s budget. A month after these statements, the woodland at Erimitis was engulfed in flames.
To put it another way, conservatives believe that environmental protection is intimately linked to profit-making.
Social empowerment
The climate problem is now out of control, according to the recently released Intergovernmental Panel on Climate Change report, and there is no turning back for many of its implications.
The report’s message is clear: we must rethink how we organize social and economic activity in order to protect future generations from the effects of a rapidly changing environment.
Wildfires in Greece and elsewhere in the area this year have demonstrated once again that this process of fundamental change requires local populations to be empowered to safeguard the environment.
In a recent interview, Goldammer emphasized the importance of putting a stronger emphasis on prevention, paying attention to urban encroachment into forest environments, and seeking increased civil society engagement.
There is no better environmental protection than one that incorporates the communities that live in the ecosystems that need to be protected.
The issue posed by climate change needs a shift in the power balance between the state and citizens, with the latter becoming more involved in governance and climate action.
Because market forces will not safeguard the environment, we cannot rely on them to do so.
Citizens’ empowerment, on the other hand, appears to be a long way off in Greece, where the government views everything through a narrow neoliberal lens.
This, combined with the fact that immediate action is required, does not bode well for the near future.
Is Greece considered a Third World country?
In a sense, Greece has already left the European Union and is now a member of the Third World. Other Third World countries’ experiences with debt crises can be instructive in this sense.
Who holds Greece’s debt?
Greece has become more resilient as a result of its previous debt crisis. It implemented a variety of reforms, including improving the efficiency of government administration, simplifying licenses, streamlining procedures, and easing trade. As a result, at the outset of the epidemic, the Greek economy was fundamentally more resilient than it had been before to the sovereign financial crisis. Despite the agony of previous consolidation measures, the country was able to enter the epidemic with a very healthy budgetary position. As a result, the government was able to address the impacts of the current crisis with remedies totaling 9.4% and 6.5 percent of GDP in 2020 and 2021, respectively.
A new debt sustainability environment
The debt structure of Greece has vastly improved. This is largely owing to the ESM’s and its predecessor, the EFSF’s, extremely favorable lending terms and the ESM’s liability management activities. The ESM controls about 55% of Greece’s public debt, and the ESM/EFSF loans have a weighted remaining duration of 31 years, which is substantially longer than the remaining debt stock. Greece’s annual costs for servicing these loans are lower than projected for its total debt level due to the low interest rate on these loans thanks to the ESM’s own low, AAA-rated cost of funding for that period.
Greece, like many other nations, is benefiting from a long-term decrease in interest rates, which has resulted in exceptionally favorable financing conditions. Low interest rates have historically lowered the debt servicing burden, both as a percentage of total expenditure and when compared to taxation. In many ways, debt sustainability evaluations are entering a new era. As we have said for some time, the focus should be on budgetary flows and roll-over concerns rather than the stock of debt (commonly measured as the debt-to-GDP ratio). The effective interest rate on Greek government debt has fallen from 7.3 percent in 2000 to about 1.5 percent in 2020, thanks to the general reduction in interest rates and the compression of risk premia. By extending the term of its debt and using interest rate swaps, Greece is locking in current low interest rates.
Greece now has more access to the European Central Bank’s (ECB) monetary policy measures than it did during the financial crisis. This lowers the country’s debt servicing costs even more. Greece’s sovereign debt is now eligible for use as collateral not just in its primary refinancing operations, but also in the European Central Bank’s current bond-buying scheme, the Pandemic Emergency Purchase Program (PEPP).
Who owes Greece money?
2 The EU emergency funding entities are owing the majority of the outstanding debt. The majority of these are financed by German banks. Governments in the Eurozone: 53 billion euros. 34 billion euros were invested by private investors.
Who did Greece borrow money from?
The Greek people voted no to a deal with countries who owe them money in a large referendum on Sunday, July 5.
Greece has borrowed a large sum of money from European banks and governments over the previous ten years.
The money was used to operate the country, pay for the 2004 Olympic Games, and for things like large pay raises for government employees.
However, they have had difficulty repaying it because when you borrow money, you must pay ‘interest,’ which means you must repay more money than you borrowed.
