For economists around the world, one of the situations that’s watched most closely is the current state of the Greek economy. For nearly a year now, Greece has been going through incredibly tough times. So tough in fact, that the country has been heavily dependent on assistance from the European Central Bank in order to stay afloat. However, as politicians continue to fail with regard to striking a deal, the country is getting closer and closer to a dismissal from the Eurozone. So today, we’ll talk about what we’ve been seeing from the Greek economy recently and whether or not the Euro is likely to continue to be the currency used by Greece.
What Caused The Greek Debt Crisis?
The situation we’re seeing in Greece has become so dyer that it’s received it’s own name; the Greek Debt Crisis. To understand the crisis, we have to look all the way back to 2008. In 2008, the US economy came across a hard time that many blame on the issuance of sub-prime mortgages. However, the Eurozone decided that it wasn’t likely to affect them, so they would not step in. Unfortunately however, the crisis hit so hard that the ripples were felt around the world; and soon became known as the worldwide economic crisis of 2008 and 2009.
During this time, the vast majority of Greek debt was held by European banks. After all, Greece is a country under the Euro and European banks figured that lending to the country would be a safe bet. Unfortunately however, they were wrong. The reality is that while the European economy and other economies around the world did a great job of bouncing back, the Greek economy reached a stand still that continues to last until this day.
What We’ve Seen From Greece This Year
This year, economic conditions are becoming increasingly worse in Greece; and it’s scaring consumers. As a result, their banks are bleeding cash as consumers start to take their money out for fear of it not being there later. Throughout the year, more than 30 billion euros have been withdrawn from Greek banks; with an estimated 2 billion euros being drawn over the course of 3 days last week alone. This is proving to lead to an even bigger problem. If consumers and businesses aren’t comfortable keeping their money in banks, the lack of cash flow leads to further economic blues. Essentially, with no money in the bank, Greece may need to start printing its own currency in order to pay government workers and other bills associated with maintaining the health of the country. However, if this is done, Greece will have no choice but to exit the Euro; and with no access to international lenders, there may not be much of a choice.
