Essay on Budget Crisis in Greece

1741 Words Feb 3rd, 2014 7 Pages
Greece is a developed country with a capitalist economy. The economy of Greece is based on service sector (85%), tourism (15%), and industry (12%), while the agricultural sector consists only 3% of the national economic output. Greece has a high standard of living, its GDP per capita is about two-thirds of the largest European economies. Greece entered the eurozone in 2000, before 2009, Greece had 14 years of consecutive economic growth. However, since 2009 Greece has been experiencing a recession. The recession was caused from debt accumulating from government borrowing and spending, and not enough tax revenues. Since Greece is part of the Eurozone, it must abide by the European Union’s requirements such as, the government budget deficit …show more content…
Figure 2 below shows the projected debt of Greece from 2005 to 2020 and the target debt percentage. With extreme spending cuts such as reducing pension benefits, rising women age for retirement, cutting funding on social policies, Greece is experiencing its first budget surplus for more than a decade. According to the Budget Office, Greece will achieve a primary surplus, before a debt payment of 812 million euros (1.09 billion dollars) this year, which is double than what the Government’s forecast, something that bodes well for meeting next year’s fiscal targets. With the budget surplus, the country has been gradually paying off its debt from an account opened last year at the Bank of Greece, what might allow them to return to the international bonds market again by 2014-2015, giving them more leverage to raise money and continue its debt payment. Greece’s budget austerity has helped them secure a write –down of its privately held debt last year and might secure other reliefs such as a further reduction on interest rates and an extension on maturity on loans. By 2020, Greece expects to reduce its debt to less than 120% of its GDP, thus gaining more leverage in future negotiations with international creditors for more loans to boost its economy. The enormous Greek debt crisis has threatened the overall stability of the Eurozone. One reason why Greece went into a recession was because Athens, the capital of Greece, failure

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