Effects Of The Greek Financial Crisis On Their Citizens And The Rest Of Europe

1264 Words Nov 13th, 2016 6 Pages
The effects of the Greek financial troubles on their Citizens and the rest of Europe In order to understand how the Greek financial crisis affects the rest of Europe; let 's reveal a little history of the of the European Union. Everything started in 1992 when EU nations signed the Treaty of Maastricht, which set steps to accomplish two goals: political union and the decision to replace each national currency with a single European currency, that until this days has eliminated different currencies as a trade barrier. According to the Treaty of Maastricht, countries had to meet certain criteria to be part of the European Monetary Union (EMU) such as the annual government deficit must not exceed three percent of GDP or gross domestic products and the total outstanding government debt must not exceed around sixty percent of GDP. The third criteria that need to be met are that the rate of inflation must remain within one percent of the three best-performing EU countries. After many negotiations effort, 11 of the 15 EU countries at that time, joined the Euro in 1999. While in the 1990s, the Greek government was experiencing a budget deficit that causes a devaluation of their currency (Drachma) because of mismanagement of funds; they were spending a lot of money in their public sectors due to good credit rating that the agencies give them, in which the banks and investors were willing to lend them cheap loans of money. This economic mismanagement led Greece to adopt the Euro…

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