Should Greece Default on Its Loans?

Should Greek Default on its Loans?

Greece joined Euro zone in 2001, and this was a good chance for Greece to develop. However, Greece was bursting to be convergent with rich countries in Euro zone while its economy was not strong, which pushed it to be sunk into huge debts. At that time, Greek was so easy to attract foreign investments, in near a past decade, Greece’s government sold bonds to get hundreds billion dollar. With this money, it might help Greece develop strongly if Greece’s government knew how to spend reasonably, but it did not happen. They seemed to sleep on the mountain of money based on debts. Greece’s government just knew to spend, especially in infrastructure, they did not care about payment plans. For example, Olympic 2004 – an most monumental and costly Olympic in history, Greece’s government spent $12 billion (higher $10 billion compare with expectation), but they did not allow any advertising on the street, which could bring them a big money. This made nation budget in 2004 deficit 6.1% of its GDP while the limit which EU allowed was 3%. In order to hide its bad financial ability, untruthfully figures were announced, especially deficit budget. Low saving and foreign loans for public spending still happened in 2002 until 2007, which pushed up the growth rates 4.2%/ per year. However, when the fake figures was discovered, many investors doubted about Greece’s government insolvency, so they were hurry to run out of Greece with their investment money. In addition, the financial crisis in 2008 – 2009 affected strongly Greek’s industry. Revenue from tourist industry and maritime transport decreased 15% in 2009. Greek’s economy was in difficulties. The main source of revenue was shrunk while they had to reinforce public spending to stimulate the economy. According to BBC (2010), “Eurostat also revised upwards the total level of Greece's debts in 2009 to 126.8% of its GDP from 115.1% previously. It predicts the country's debts will hit 144% this...