Greece, a European state is still making space in newspapers for the financial crisis that emerged as a long coming problem for Eurozone. The country was refused to join the Eurozone after euro came into force in 1999. High inflation rate and high debt were the reasons. But later, Greece was allowed to join the group. Then, what happened later that led to this crisis? Well here is the reason of the crisis with the current status of the crisis
What Led to the Crisis?
The debt crisis started from imploding of Wall Street in 2008. The situation got more sever in 2010,when Greece was shut out of borrowing from financial market leading to a situation of bankruptcy, which is seen as a financial crisis. This lead IMF, European commission and European central bank to issue bailout to Greece totaling 240 million euros. This in turn imposed high tax, budget cut and tough austerity terms. The organization also want Greece to change the economy a bit, ending tax evasion and making business easier in Greece. The condition went more grief with unemployment going above 25% and shrunk the economy by one fourth in five years. The bailout money was mainly used to pay international loans instead of gearing up the economy. Even the loan was not entirely paid from that money. Austerity was called the reason behind it. Mr. Tsipras stated that austerity terms have created humanitarian crisis in the country. Whereas other nations like Germany blamed Greece for not overhauling the economy mentioned in the agreement.
Greece’s Effect on Eurozone
After the sever conditions started prevailing, its effect was thought to be seen on rest of the world. It is assumed that if Greece exited the Eurozone following default on its debt, a global financial crisis will appear. This lead to the birth of the term “Grexit”. Europe prepared itself from the spreading of financial shock by safeguarding itself. If Greece has to left the Eurozone then it would have to face struggle and Europe will get rid of a member who need neighbor’s support.
The crisis resulted in selling of shares and other holdings in Greece. Other European countries in Eurozone like Spain, Ireland and Portugal started taking crucial steps for overhauling their economies in order to avoid speeding of financial crisis.
Recent Steps to Neutralize the Effect
On 13th July, an agreement was signed between Greece and European creditors to resolve Greece’s debt crisis and keep its position in Eurozone. The banks in Greece have opened again after closure for 3 weeks. The reopening gave relief to the common people waiting to withdraw money from ATMs. The step is expected to boost the economy. Greece repaid 2 billion euros to IMF and 4.2 billion bond payment to European central bank. This money came from 7.16 billion euros bridge loan that European Union had approved. This repayment has made it eligible for further fund assistance from IMF.
The current situations have given some relief to the people and if it goes as per plan then, the debt crisis will surly end. The effect was expected to spread to other nations also but timely actions stabilized the condition.