Greek Crisis Analysis

Introduction

Since the 1980s, Greek political battles forced Greece to endure constant transformation of their economic structures. These fluctuations created economic instability due to rapid changes in devaluation and inflation cycles. After successfully joining the Eurozone in 2001, Greece’s economy progressed enormously. However, the Greek government acted irresponsibly with its fiscal policy and debt accumulation. Consequently, the created economic weaknesses became apparent during the 2008 global financial crisis. The Greek sovereign debt crisis has required multiple controversial bailouts. The bailouts that prevented Greece from defaulting, led to two opposing opinions from leaders of the members of the European Union (EU), (1) to support Greece to remain member of the Eurozone and, (2) to pressure Greece to exit the Eurozone.

Greek constant economic restructuring

Introducing the “populist policies” during election seasons were the core of Greek political parties strategy. Political parties were forced to craft and innovate new economic structures to gain support from the voters. In 1980s, for example, the notion of public protection and equal income redistribution strengthened confidence in Greek’s voters. The massive increase of the public spending (10% increase of the GDP from 1980 to 1990) caused turmoil in Greek economic structures. The newly elected government’s acquisition of Bank of Greece resulted in the Greek government having direct control of the country’s monetary policies. This caused dramatic economic impacts such as; public debt tripled to 89% by 1990, from 28% in 1980; economic growth plummeted due to the decline of the GDP (at less than 1%), and the interest rate on debt increased to 10% of GDP in 1990. Subsequently, in 1993, the government led by Andreas Papandreou and Constantine Simitis, of PASOK, enforced stricter tax policies. In return, the government created a surplus of 4.2% of GDP (1994) from a deficit of 5.1% (1990)...