The Crisis of the Greek Public Debt

Introduction:

The crisis of government debt comes from the fear of creditors of Greece on its ability to repay its debt and to pay interest on that debt. It results from both the global economic crisis and country-specific factors: high indebtedness (approximately 120% of GDP) in 2010, budget deficit that exceeds 13% of GDP. This crisis was exacerbated by the lack of transparency shown by the country in the presentation of its debt and deficit, including raising funds off-balance through financial instruments developed by the bank Investment Goldman Sachs. What is special about the Greek crisis compared to other countries in the euro zone, the extent of its structural problems, including its inability to collect taxes. This led Brussels to create a task force of senior officials to help the Greek state in these areas.
 This crisis marks more broadly the beginning of the debt crisis in the euro area. Greece and to help prevent the crisis reaches Portugal and Spain, countries in the euro area and the IMF decided to help Greece and arrive May 2, 2010 an agreement on a loan $ 550 billion, conditioned to the implementation by Greece of a structural adjustment. Moreover, the Greek crisis pushes countries to reform the structures of the euro area. Since May 2011, Greece had to again call on European countries and the IMF. The crisis experienced a second period of tension. In particular, it leads to further discussion between the Europeans. The French Government is ready to help Greece again, the German Government that banks and financiers who lent without really taking into account the situation of the country are also involved. Meanwhile, the Greek government is under pressure from the street and the UN warned in a report released June 21, that the policies of radical reduction of public deficits threaten employment, social spending and economic growth make any very unclear. The solution advocated for Greece would be against-productive.

I. The economical causes of the crisis.

The economy of Greece was one of the most dynamic in the euro area from 2000 to 2007 with a growth rate of 4.2% thanks to the inflow of foreign capital. A dynamic economy and lower interest rates (thanks to its entry into the euro area) allowed Greece to finance large structural deficits. Since joining the euro zone government debt has always been greater than 100% of GDP. The financial crisis of 2007-2010 and the ensuing economic crisis have particularly affected Greece. Its two main economic sectors, tourism and maritime transport, have been severely affected and have seen their income drop by 15% in 2009.
 The unemployment rate in Greece rose to 10.3% in the fourth quarter of 2009 against 7.9% a year earlier. Young people between 15-29 years and women are most affected with respective rates of 20.4% and 14%, almost double that of men.

The European Commission has asked Greece to explain the financial instruments to which it would have been used to conceal the extent of its debt. According Christoforos Sardella, who led the agency managing the government debt from 1999 to 2004, Greece would have used on the advice of Goldman Sachs swap contracts to offset currency artificially by several years the interest payments on its debt. In 2002, Goldman Sachs would have enabled Greece to raise a billion dollars in funding bilan2 out. This crisis led to a decline of the euro that promotes exports and the recovery, but also penalizes imports (including oil) and finally causes a crisis of confidence in the European currency. 
 The economist Florin Aftalion said that while Enron executives have been sentenced to prison, no one seems to care to account for Greek leaders who submitted budgets that did not reflect reality . 
To place its debt obligations the Greek government relies on foreign investors would hold 70% stake in Greek debt. It was suggested that the chronic deficit had historical and cultural roots date back to some distrust of the Ottoman Empire (of which Greece was a subject), suspicion would have carried over to state authorities. Tax evasion is estimated at 20 billion dollars a year.

Greece is for the former Commissioner for Internal Market and competition Mario Monti, a country "refractory to the single market and competition" that "has managed to fight corporatism and rent-seeking, in the private and public. " Nevertheless, inflation has been strong in the country and caused a loss of competitiveness has led to a large deficit in the trade balance. Taking a base 100 in 1997, consumer prices in 2009 are 119.2 and 146.4 in Germany to Greece. Gold membership in the euro area does not allow him to regain competitiveness by devaluing and forces it to pursue a policy of rigor. The current account deficit for 2008 exceeds the 16% of GDP "in other words, the Greeks had begun to consume more than they needed to find and produce nearly 40 billion abroad to finance that consumption ". 
 Moreover, the successive governments since the seventies and the end of the dictatorship did not seek to create a genuine rule of law. The country's accession to the EU in 1981 was intended by politicians including Valéry Giscard d'Estaing, although the country was not ready: the taxes were not paid, the register does not exist, the "scam personal "was everywhere, bloated administration. The Greek government has done much to then join the Euro "but the reforms were not made" and each party continued to "defend their turf in a traditional corporatism" while the administration is 7% of GDP when the European average is 3%.

II. The first phase of the crisis during spring 2010.

On April 23, 2010, Greece requires the help of the IMF and the EMU. After negotiating an agreement is reached May 2, 2010. Athens gets the credit of the European Union and the IMF to the tune of 110 billion euros over three years (80 billion euro loan from the countries of the euro area and 30 billion by the IMF). 
In return, Greece is a series of measures whose implementation will be closely monitored by donors: the IMF and the countries of the euro area. The measures are part of the agreement, we can mention: 
 * the removal of 13th and 14th months in the civil service offset by an annual premium of 1,000 euros for employees earning less than 3000 euros 
 * freezing the salaries of civil servants for three years.24 
 * the thirteenth month is held in the private sector, labor market flexibility will renforcée23 
 * the duration of pension contributions will be increased from 37 to 40 years annuities in 2015 
 * opening of closed professions 
 * tax on illegal homes 
 * further increase in VAT to be increased to 23%

On 23 April, Eurostat revised upwards the country's budget