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Preliminary Research Paper
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Preliminary Research Paper
Introduction
The Greek crisis was prompted by the issue of the great recession all around the world. Greek was already facing economical issue since 2007 where great recession resulted in a debt crisis. The economy had already weaknesses and was lack of flexible monetary policy which reveals the reality about the actual deficit level of the nation. Initially, the deficit was underreported and the forecast was not calculated accurately by the government which made the situation worse. The main factors involved in the Greek debt crisis include; great recession, current account deficit, excessive government spending, high government debt, and low GDP growth and data credibility. Greek received billions in bailout, however poor performance of government in addition to issues like corruption made difficult for the nation to come out from the debt crisis. The debt crisis results in the high taxes and high unemployment level where the loss of trust by foreign investors made the business performance poor.
Discussion
The Greek debt crisis is the most dangerous debt crisis in the world which is a great threat to the economy of the other nations. European Union made possible for Greek to avoid the default by providing high payments however, it turned into the largest financial rescue in the history. The crisis prompted the Eurozone which might expand in financial crisis worldwide. The budget deficit of the Greek increased to 15% from its total GDP which shut down the ability of Greek for further finance. The disability to finance results in difficulty for the debt repayments. Greek wants the European Union to forgive some of the debt ratios however, it is not possible because it can create hurdles for the economies of the nation who gave the loan.
People of Greek facing several financial and social issues due to the debt crisis. For instance, the government announced to lower the percentage of pension share from GDP. The reason behind lowering the pension is that pension percentage is highest in Greece than any other European nation. In addition, one out of every five people is above 65 and receiving a pension. By lowering the ratio of pension, the government can increase its revenue ratio. Pension uses 17.5% of GDP which requires to be cut done at least one percent with increasing the pension contribution and decreasing the early retirement by the employees. It can develop difficulties for the citizens because half of the Greek population relied on pension income.
Decreasing the percentage of pension income is not enough, the government is increasing taxes on different goods and services. The increase in taxes effect both the consumers and producers. Increase in tax rate results in an increase in costs. When the cost of production increases it leads to an increase in prices and a decrease in the demand due to the decrease in disposable income. Therefore, Greek where one-third of the population living below the poverty line, high taxes are resulting in an increase in the level of unemployment. The employment rate is increasing to 25% while youth unemployment rate hit about 50%. Such condition is making difficulties for the financial condition of the people especially middle and lower class. However, by increasing the taxes along with a decrease in government spending, Greek is making a budget surplus of 0.8% with 1.4% economic growth.
Impact on common people & testimonies:
Due to the increase in taxes, thousands of people have lost their job and the unemployment level is increasing. As fifty percent of the population relied on the pension income and with the cut down in pension income people are facing financial problem. A famous newspaper "The New York Time", published the news about the suicide of the 66-year-old man. Her wife shared the information that how lowering the pension deepened the despair of the family. In the result, Anna’s husband who was the retired bus driver attempt suicide. The news also highlighted the healthcare experts’ studies who believe that debt crisis results in the increase in depression and mental issues in the people of Greece. The suicide rate is also increasing after imposing the high taxing and cutting the pension during the crisis. The suicide rate in 2016 increased from 3.3 to 5 per 100,000 people ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"tR6SQ5gC","properties":{"formattedCitation":"(Kitsantonis, 2019)","plainCitation":"(Kitsantonis, 2019)","noteIndex":0},"citationItems":[{"id":445,"uris":["http://zotero.org/users/local/mlRB1JqV/items/LSX2JNC2"],"uri":["http://zotero.org/users/local/mlRB1JqV/items/LSX2JNC2"],"itemData":{"id":445,"type":"article-newspaper","title":"Greece, 10 Years Into Economic Crisis, Counts the Cost to Mental Health","container-title":"The New York Times","section":"World","source":"NYTimes.com","abstract":"Depression and suicide rates rose alarmingly during the debt crisis as the country cut wages and health services and increased taxes.","URL":"https://www.nytimes.com/2019/02/03/world/europe/greece-economy-mental-health.html","ISSN":"0362-4331","language":"en-US","author":[{"family":"Kitsantonis","given":"Niki"}],"issued":{"date-parts":[["2019",2,4]]},"accessed":{"date-parts":[["2019",5,24]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Kitsantonis, 2019).
Cash crisis affecting people as well as local businesses. Lettuce farmer Andonis Vezyroglou is facing difficulty due to the crisis. Cash crisis results in decreasing his sales. Sales were dropped about twenty to twenty-five percent a week and he was expecting more loss in the upcoming week. The reason behind the fall in sales is the shortage of cash. Most of the people rely on cash for purchasing and selling goods and services. Especially lower and middle class use liquid money and due to the cash crisis, many suppliers are not willing to carry on the business transaction with the farmer. The business based on food items are still making better while other businesses are facing worse condition than this and losing about eighty percent on their business ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"klZfd0gF","properties":{"formattedCitation":"(\\uc0\\u8220{}How the cash crisis in Greece is affecting ordinary people,\\uc0\\u8221{} n.d.)","plainCitation":"(“How the cash crisis in Greece is affecting ordinary people,” n.d.)","noteIndex":0},"citationItems":[{"id":448,"uris":["http://zotero.org/users/local/mlRB1JqV/items/5RZT6M9S"],"uri":["http://zotero.org/users/local/mlRB1JqV/items/5RZT6M9S"],"itemData":{"id":448,"type":"webpage","title":"How the cash crisis in Greece is affecting ordinary people","URL":"https://www.pri.org/stories/2015-07-08/how-cash-crisis-greece-affecting-ordinary-people","accessed":{"date-parts":[["2019",5,24]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (“How the cash crisis in Greece is affecting ordinary people,” n.d.).
There are many other real-life examples shared by the common people that highlighting the condition of the households and their financial issue. Greek debt crisis not only creating problem in business is also resulting in unemployment, bad mental condition and increase in the suicide rate in the nation. The Greek crisis is not a sudden issue that emerged in the nation it is the result of the past performance of the governments and economic and political activities. The bad performance of the government is the real testimony of the Greek crisis along with the negative role of the banking system in the nation which leads to the cash crisis. The implication and probability of Greek government default on not only Greece but also the Euro area and global economy. Another testimony of the crisis is the exposer of America's taxpayer to provide loan to the Greek government through the IMF. Debt sustainability of Greek totally depends on the performance of the government to generate a higher GDP to repay the debt and the structural economic reforms that increase the growth of the economy.
Conclusion
The Greek crisis is the result of poor government performance, the impact of the great recession and inefficient data credibility. Greek tried to cope with the issue by borrowing the money from European Union, however, an issue like lack of flexible monetary policy, corruption, and ineffective structural reforms unable Greece to generate the high GDP to pay back the loan. Greek government tried to European Union to forgive debt but lenders are not ready to help government because if Greek government gets failed to pay back the loan the nation's debt crisis can be spread to the economies of the other nation especially who give loan to the Greek. The policies made by the government include a decrease in the ratio of the pension, government spending and an increase in the tax rate. Various real-life examples indicating the condition of the common people due to the debt crisis. The debt crisis is harmful to the business, sales are falling due to the cash crisis where most of the people make the transition through cash. Another example that is the result of a decrease in pension indicating that people are facing financial issues which result in an increase in the suicide rate. Healthcare reports indicate that people are facing the issue of depression, anxiety, and suicidal ideation.
References
ADDIN ZOTERO_BIBL {"uncited":[],"omitted":[],"custom":[]} CSL_BIBLIOGRAPHY How the cash crisis in Greece is affecting ordinary people. (n.d.). Retrieved May 24, 2019, from https://www.pri.org/stories/2015-07-08/how-cash-crisis-greece-affecting-ordinary-people
Kitsantonis, N. (2019, February 4). Greece, 10 Years Into Economic Crisis, Counts the Cost to Mental Health. The New York Times. Retrieved from https://www.nytimes.com/2019/02/03/world/europe/greece-economy-mental-health.html
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