Greece's external debt is increasingly mentioned in the news today. Moreover, they talk about it in the context of the debt crisis and the possible default of the state. But far from all of our compatriots know what this phenomenon is, what are its prerequisites, and what consequences it may entail not only for this small country, but for the whole of Europe. We will talk about this in this article.
Background
Today, Greece's external debt is more than 320 billion euros. This is a huge amount. But how did it happen that this small country was able to owe so much money? The Greek debt crisis began in 2010 as part of a similar economic phenomenon in Europe.
The reasons for this situation are very diverse. So, on the one hand, this is a regular correction of statistics and data on the economy by the government since the introduction of the euro into circulation in Greece. In addition, the public debt of Greece began to grow exorbitantlydue to the global economic crisis that broke out in 2007. The economy of this country turned out to be especially sensitive to changes, since it largely depends on the service sector, namely tourism.
The first concerns among investors appeared in 2009. Then it became clear that Greece's debt was increasing at a very serious and menacing rate. So, for example, if in 1999 this indicator to GDP was 94%, then in 2009 it reached the level of 129%. Every year it increases by a very significant amount, which is many times higher than the average for other Eurozone countries. This led to a crisis of confidence, which could not have a positive effect on the inflow of investments into Greece and the growth of its GDP.
On a par with this, the country's budget has been in deficit for many years. As a result, Greece was forced to take out new loans, which only increased its public debt. At the same time, the country's government cannot somehow regulate the situation by increasing inflation, since it does not have its own currency, which means it cannot simply print the necessary amount of money.
EU assistance
In order to avoid the prospect of bankruptcy, in 2010 the Greek government was forced to ask for help from other EU member states. A few days later, due to the increased risk of default, the rating of government bonds of the Hellenic Republic was downgraded to "junk" level. This led to a serious fall in the euro and the collapse of the stock market around the world.
As a result, the EU decided to allocate a tranche of 34 billion euros to help Greece.
Terms of assistance
However, the country could receive the first part of the tranche only if a number of conditions were met. We list the three main ones:
- implementation of structural reforms;
- implementation of austerity measures to restore financial balance;
- end in 2015 of the privatization of the state. €50 billion in assets.
A second bailout package of around $130 billion was provided on the promise of even tougher austerity measures.
In 2010, the Greek government began to implement the listed conditions, which led to a wave of mass protests from the country's residents.
Government Crisis
In 2012, in May, parliamentary elections were held in Greece. However, the parties failed to form a government coalition, as representatives of the radical left did not make concessions and spoke out against the austerity measures proposed by the European Union. It was possible to form a government only after the repeated elections, in June 2012.
The coming to power of the SYRIZA party
As a result of the fact that the parliament formed in 2012, two years later, could not elect the country's president, it was dissolved. Therefore, in January 2015, extraordinary elections were held, following which the SYRIZA party came to power, headed bywith a young and ambitious politician - Alexis Tsipras. The party managed to win 36% of the votes, which secured 149 out of 300 parliamentary seats. The coalition with SYRIZA included members of PASOK, the Ecological Greens and representatives of the radical left. The main point of the election program of Tsipras and his associates was the refusal to sign new loan agreements with the European Union and the abolition of austerity measures. It is thanks to this that the party received such strong support from the people of Greece, whose representatives are tired of paying for the mistakes of previous governments.
External debt of Greece and the state of the country today
. So, Tsipras simply demanded to write off the state. Greece's debt to foreign creditors. Neither the EU nor the IMF agree with this position. For the past six months, meetings have been regularly held at the highest level, the purpose of which is to develop an action plan that would satisfy both parties. But so far no compromise has been reached.
The situation has recently escalated due to the fact that until June 30, Greece must pay the IMF loan payment in the amount of 1.6 billion euros. But if the country does not receive the next tranche of the loan in the amount of 7.2 billion euros, it simply does not havethere will be money to pay off the specified amount. However, during a meeting held on 18 June, she was denied further assistance. Recall that today the debt of Greece is more than 320 billion euros.
Thus, today the country is on the verge of default. In addition, for a long time there have been talks about the possible exit of Greece from the Eurozone, as well as the introduction in this state of a currency that will be in circulation in parallel with the euro. One way or another, the situation in this country has the most negative impact on the state of the entire European Union.
