Greece is one of the Eurozone countries facing a debt crisis. After the global recession in 2009, the government debt soared to great heights as the country was unable to fulfill its debt obligations. Greece joined the European Union in 1981 and it was one of the poorest members. The country joined the Eurozone in 2002 although there was unreliable data on the country’s fiscal status. After the commencement of the debt crisis in 2009, it was discovered that the country had misreported its economic statistics to the Euro for many years. Greece had paid several banks large amounts of money to hide the country’s actual borrowing levels. This was aimed at helping the government to continue spending enormous amounts of money without revealing the real borrowing levels.
1. Collapse of tourism industry: Greece boasts of having the best tourist sites in the world ranging from ancient churches, exotic beaches and museums. However, the tourism industry started deteriorating in 2002 when other competitive tourist destinations such as Turkey started offering cheaper holiday rates. The 2009 global financial crisis made matters worse as two of the most important industries in the country—shipping and tourism—were adversely affected. This resulted in falling of revenue by 15 percent in 2009, which had a negative effect on the country’s GDP rate.
2. Government overspending: The Greek government has been living beyond its means by borrowing too much and overspending. One such example is during the 2004 Olympics summer game held in Athens when the government spent astronomical amounts of money in building new stadiums, roads and airports during these games. More money was splashed in acquiring tram and metro systems to ease movement of people during the games. Most of this cash was borrowed from the EU and the income generated during the games was insufficient. The government has also spent a lot of cash in excessive salary rises and non growing sectors such as the army.
3. Corruption and tax evasion: Black market in Greece is thriving and it is estimated it costs the government €20bn in taxes. Corruption is rampant in Greece according to Transparency International and costs the government a substantial amount of income every year.
Current financial situation
Greece has received two bailouts loans from European Central Bank and International Monetary Fund. The first bailout loan totaled to €110 billion and the second one was €130 billion. The loans were awarded after the government put into place austerity measures that aimed at cutting down on government spending and increasing taxes. This resulted in massive protests and riots throughout the country.
Possible solutions to crisis
The Greek government must continue making spending cuts in all sectors of the economy and increase taxes. This will make it possible for the country to pay back the bailout loans from IMF and ECB. The government must also strive to eradicate corruption and fight the rampant black market. Greece must also put into place systems that will streamline tax collection and eradicate tax evasion.