Greece financial crisis in short

Greece Crisis in short

The Greece crisis which started around 2009 was 1^st of the five sovereign debt crisis. It was due to Greece’s inability to meet debt obligations .The root of the problem lay right from 1999 with the introduction of Euro as common currency. Till then Greece could devaluate its currency to increase export trade at bad times. During 2001-2007 Greece enjoyed the inflows of money .But this happened as Greece was part of Eurozone ; as creditors thought core countries like Germany would come to the rescue of Greece in crisis situation. As the Great recession spread to Europe, the inflows of money had stopped in Greece. Fiscal mismanagement and deception increased borrowing cost to a point where no inflow was possible in Greek economy. Currency depreciation could have solved the problem to payback debt in cheaper currency.But as Greece remained in Euro, the wages increased.This in turn led to increase in deflation ,leading to high debt to GDP ratio. The misreported debt obligations by previous governments came out in 2010 when credit rating agencies dubbed Greece economy as Junk Bond Status. Since then many bailout packages have been issued by TROICA namely the EC, ECB and IMF and some austerity measures to remove Greece from crisis.

Good money inflows +high government spending  = No serious troubles

But after global financial crisis

No money inflows + misreported debt by previous govt + inability to devaluate currency + inability to payback high debt = Greece Crisis