Greece Bail out Crisis

Greek government-debt crisis

The Greek government-debt crisis started in late 2009. Economist Paul Krugnman wrote in February 2012: "What we’re basically looking at...is a balance of payments problem, in which capital flooded south after the creation of the euro, leading to overvaluation in southern Europe." He continued in June 2015: "In truth, this has never been a fiscal crisis at its root; it has always been a balance of payments crisis that manifests itself in part in budget problems, which have then been pushed onto the center of the stage by ideology."

The translation of trade deficits to budget deficits works through sectoral balances. Greece ran current account (trade) deficits averaging 9.1% GDP from 2000–2011.

 Greek bailout referendum, 2015

 A referendum to decide whether Greece was to accept the bailout conditions in the country's government debi crisis proposed jointly by the European Commission (EC), the Interational Monetary Fund  (IMF) and the European Centarl Bank (ECB) on 25 June 2015, took place on 5 July 2015.The referendum was announced by PM lexis Tsipras in the early morning of 27 June 2015. 

                       

Ballot paper used in the referendum (ΟΧΙ = No, ΝΑΙ = Yes)

As a result of the referendum, the bailout conditions were rejected by a majority of over 61% to 39% approving, with the "No" vote winning in all of Greece's regions. The referendum results also forced the immediate resignation of  New Democracy leader Antonis Samaras as party president because of the perceived negative result of the "Yes" choice, to which the conservative party and Samaras had commited themselves.

Effect on Global Bank

 Many people are wondering why the Greek economy is having  such a major effect on the global markets.   Why is such a small country making the world’s major markets rise and fall with every headline that comes out regarding their possible economic collapse?  Fear of the unknown is driving the seemingly schizophrenic markets up and down like a yo-yo.  When Greek Prime Minister George Papandreou presented the idea of a referendum on the bail out uncertainty and fear grew to a fevered pitch.   The masses in Greece did not want to submit to the changes that would be required by the European Central Bank (ECB) for the new bail out loan, but the government believed that without it the economy will totally collapse.  There are two major components to this issue.  First is the chance of Greece defaulting on the bailout loans that they have already been given.  The second has to do with the chance that they could pull out of the Euro as a currency.