Greek Financial Crisis Essay

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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 …show more content…
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 in 2001 in which “Greece became the 12th—and last—country to join the Eurozone before the launch of the euro at the beginning of 2002.” 8] From this turning point, lets us examine the …show more content…
Unfortunately, this causes the investors to lost confidence in the Greek government’s ability to solve their budget deficits, so European Banks and investors started demanding higher rates of interest to compensate for the risk that they might not get their money back. Considering this, troika was formed by the European Central Bank, the International Monetary Fund (IMF) and European Commission to help increase financial liquidity for those EU nations that have been affected by the global financial crisis to solve their budget problems. “Since 2009, Greece has been kept on life support by two bailouts from the European Union, European Central Bank, and International Monetary fund worth a total of €240 billion ($320 billion).”5] This means that the Euro adaptation was bad for Greece because the Greek government is running the country using only the monetary fund from the troika; which this aid money helped them to pay their bills. The problem with this is that the money Greece own today is to the troika that is controlled by Germany, and not to the European banks. Therefore, the troika has been providing Greece with loans but with conditions “…The austerity plan meant less

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