Background on Greece Debt Crisis

Greece is experiencing the severe debt crisis right now, which started in late 2009. The root cause for its eruption in Greece was a combination of structural weakness in the Greek economy along with a decade-long pre-existence of overly high structural deficits and debt-to-GDP levels of public accounts.

Despite having received 240 billion euros in aid since 2010, Greece still remains stuck in this debt crisis. There are two major facts on the economic and financial challenges currently facing Greece.

The first is Greece’s crisis-wracked economy. The problems posed by Greece’s debt-laden economy and the risk of it having to leave the 19-member via a so-called a “Grexit”, have weighted on many European Union summit meetings. Furthermore, the risk has grown substantially when Greek voters handed power to the radical left party Syriza which fiercely opposes the terms of previous international bailouts. Greece’s financial crisis has grown steadily, whose 2014 debts of 317 billion euros were deemed unsustainable by the IMF. Therefore, they had to ask for two bailouts. The first one was 110 billion euros from the EU, IMF and ECB, and the second one was additional loans worth 130 billion euros and the write-off of 107 billion in debt held by private creditors. However, the economic situation was still deteriorating with average earnings falling and unemployment rate rising.

The second is Greece’s politics dominated by dynasties, which is obviously bad for Greece’s economy because it will limit its development and the progress. On the political stage, three families have dominated the avenues of power in Athens for five decades. On the left, Papandreou clan, George, held power before a junta of army colonels ruled from 1967-1974. His son Andreas then took the flame. On the right, the Karamanlis and Mitsotakis families lead the government.