When Greece
joined the euro in 2001, confidence in the Greek economy grew and a big
economic boom followed. But after the 2008 financial crisis, everything
changed. Every country in Europe entered a recession, but because Greece was
one of the poorest and most indebted countries, it suffered the most. The
unemployment rate reached 28 percent in 2013, worse than the United States
suffered during the Great Depression.
But Greece shares its monetary policy with
the rest of Europe. And the German-dominated European Central Bank has given
Europe a monetary policy that's about right for Germany, but so tight that it
has thrust Greece into a depression.
So Greece
is squeezed between a crushing debt burden - 177 percent of GDP, about twice
the level in the United States - and a deep depression that makes it difficult
to raise the money it needs to make its debt payments.
For the last five years, Greece has been
negotiating with European Commission, the European Central Bank, and the
International Monetary Fund (dubbed "the Troika") for financial
assistance with its debt burden. Since 2010, the Troika has been providing
Greece with loans in exchange for tax hikes and spending cuts.
Rich European nations such as Germany
believe they're simply insisting that Greece live within its means. But the
austere terms of the bailouts have caused resentment among Greeks and
contributed to crisis-level unemployment and poverty. In January, they elected
a new left-wing prime minister, Alexis Tsipras, who promised to reject the
previous bailout deal and secure a more favorable agreement.
But he has very little leverage. In 2010,
Greek debt was widely held by private banks, so a Greek default could trigger a
financial panic. But since then, this debt has been consolidated in the hands
of rich European governments, greatly reducing the risk of a financial crisis
if Greece defaults.
So Greece faces a hard choice: it can accept
the Troika's demands for further austerity. Or it can defy the Troika, which
would likely lead to a default on Greek debt and possibly a Greek exit from the
euro. The Greek government is holding a referendum on July 5 to let voters
choose between these bad options.
In the meantime, the Greek economy is melting
down. Knowing that Greek euro deposits could soon be transformed into devalued
drachma deposits, Greek people have been rushing to ATMs to withdraw as much
cash as they can. That has forced the Greek government to close the banks and
limit withdrawals to €60 per day.
Πηγή:
vox.com
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