Today, the news increasingly refers to the external debt of Greece. And they talk about him in the context of the debt crisis and a possible default of the state. But not all of our compatriots know what this phenomenon is, what are its premises, and what consequences it can entail, not only for this small country, but for the whole of Europe. We will talk about this in this article.
Background
Today, Greece’s external debt is more than 320 billion euros. This is a huge amount. But how did it happen that this small country was able to owe so much money? The debt crisis in Greece began in 2010, becoming part of a similar economic phenomenon in Europe.
The reasons for this situation are very diverse. So, on the one hand, this is a regular update of statistics and data on the economy by the government from the moment the euro was put into circulation. In addition, Greece's public debt began to grow excessively due to the global economic crisis that erupted in 2007. The economy of this country turned out to be especially sensitive to changes, since in many respects it depends on the service sector, namely tourism.
The first concerns among investors appeared in 2009. Then it became clear that the debt of Greece is growing at a very serious and menacing pace. So, for example, if in 1999 this indicator to GDP was 94%, then in 2009 it reached the level of 129%. Every year it increases by a very significant amount, which is many times higher than the average for other countries in the Eurozone. This led to a crisis of confidence, which could not have a positive effect on the influx of investment in Greece and the growth of its GDP.
Along with this, for many years the country's budget has been scarce. As a result, Greece was forced to take new loans, which only increased its public debt. At the same time, the government of the country also cannot somehow regulate the situation by means of inflation, as it does not have its own currency, which means it cannot simply print the necessary amount of money.
EU assistance
In order to avoid the prospect of bankruptcy, in 2010 the Greek government was forced to ask for help from other EU member states. A few days later, due to the increased risk of default, the rating of government bonds of the Hellenic Republic was downgraded to a “junk” level. This led to a serious depreciation of the euro and the collapse of the securities market around the world.
As a result, the EU decided to allocate a tranche of € 34 billion to help Greece.
Help Terms
However, the country could receive the first part of the tranche only if a number of conditions were met. We list three main ones:
- implementation of structural reforms;
- the introduction of austerity measures in order to restore the financial balance;
- The end of state privatization in 2015 assets worth 50 billion euros.
The second package of financial assistance, which amounts to about 130 billion, was provided under the obligation to carry out even more stringent austerity measures.
In 2010, the Greek government began to implement the listed conditions, which led to a wave of mass protests from the inhabitants of the country.
Government crisis
In 2012, in May, parliamentary elections were held in Greece. However, the parties failed to form a government coalition, since representatives of the left radical forces did not make concessions and spoke out against the austerity measures proposed by the European Union. They managed to form a government only after the repeated elections in June 2012.
The coming to power of the SYRIZA party
As a result of the fact that the parliament formed in 2012 after two years could not elect the president of the country, he was dissolved. Therefore, in January 2015, early elections were held, as a result of which the SYRIZA party came to power, led by a young and ambitious politician, Alexis Tsipras. The party managed to get 36% of the vote, which provided it with 149 out of 300 seats in parliament. The coalition with SYRIZA included members of PASOK, the Ecological Green Party and representatives of leftist radicals. The main point of the election program of Tsipras and his associates was the refusal to sign new credit agreements with the European Union and the abolition of austerity measures. It is precisely because of this that the party received such serious support from the people of Greece, whose representatives were tired of paying for the mistakes of previous governments.
