Even if you aren’t well-versed in politics or international finance, chances are you have at least heard of the current financial crisis in Greece. The Greek government-debt crisis, also referred to as the Greek depression, started in late 2009 and was the first of five major sovereign debt crises in the eurozone (collectively known as the European debt crisis). It came as a result of multiple triggers, including structural weaknesses in the Greek economy, turmoil following the Great Recession, and a crisis in confidence among lenders. This article is part of a three part series about Greece and its financial state. In part one you saw a brief overview of the history of currency in Greece; in part two you learned about the factors leading up to the Greek financial crisis. Now, in part three, you’ll get a brief overview of the current financial state in Greece and what is on the horizon for Greece financially.
As of this past August, Greece has just narrowly avoided defaulting on its debt after receiving billions of euros in aid from the so-called troika, which consists of the International Monetary Fund, the European Central Bank, and the European Commission. So far, Greece has received the first of two international bailouts, which together will total about 240 billions euros, which at current exchange rates is about $264 billion.
Most of the bailout money will go toward making a crucial payment to the European Central Bank rather than toward rebuilding the country’s shattered economy. This payment, however, is helping to ensure that Greece will not become burdened with exorbitant interest rates, and that the country will not be leaving the euro currency union anytime soon.
The bailouts, however, do come with some strings attached. Greece will have to significantly raise taxes and make several major budget cuts, including cuts in social services. Greece will also see an overhaul in its economy, with a more streamlined government that cracks down on tax evasion and money squandering.
Even with these bailouts, the Greek economy itself remains in dire straits. The economy has shrunk by a quarter in the last five years, and unemployment rates are still hovering at around 25 percent. The country will still see a staggering debt load that it will not be able to start managing unless a recovery begins to take hold.