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  • Michael N.

Debt Crisis in Greece

In most of my articles (in case there is anybody out there who has read all my articles) I tend to talk about successful economies and countries. Not all economies are successful. Today I’m going to talk about Greece.

Now Greece isn’t the poorest country; it has a high HDI, it’s democratic and generally Greece -compared to the world average- is a great country to live in. However, Greece is lying in debt and it’s economy has still not recovered since 2008.

Greece suffered greatly in the Financial Crisis of 2008. It was already in debt then and it suffered worse than other countries. Greece therefore lost many jobs and it had to raise its revenue over it‘s spending, which means it was collecting more money than it was spending.

Due to this, Greece has an income tax of 45%, which is very high. Greece spends a lot of it‘s money on it’s military. For centuries, it’s enemy has been Turkey, which is a much larger country. Every male in Greece has to attend military service. Due to it‘s high taxes, those who get paid a high salary leave Greece, which damages the economy. These people go to work somewhere else, which then improves that economy. 25% of the Greek economy is dependent on tourism, which comes from its ancient history and its natural beauty and heat.

Unfortunately, when Covid came there were barely any tourists in Greece, which negatively impacted the economy greatly. Greece is also heavily reliant on its exports, such as fruits. But why was Greece in debt before the economic crisis came? Greece sat under a military dictatorship until 1971, which meant there was barely any economic growth at the time.

Democracy was restored but some Prime Ministers were corrupt and gave social service workers a raise if they voted for them. This put Greece in a high spending zone. However, from 2000 to 2008 the Greek Economy nearly tripled in size. This was great for Greece but the State of Greece was still spending more money than it was collecting… Some of this was on the 2004 Olympics and other questionable things. Imagine you have a good job and you’re spending more than you make. If you lose that job, you are in big trouble… Greece lost its job after the 2008 Financial Crisis.

In Iceland, the Icelandic Banks were worth ten times that of the national GDP, whereas in the United States the banks were worth less than that. That’s why the United States could give the banks their money back, whereas in smaller countries they couldn’t afford to repay their bank‘s money. This lead to the economic situation becoming worse. Iceland has its own currency: the Icelandic Krona; Greece has the Euro. After Iceland‘s economy crashed, the Krona never recovered. As bad as that may be, that meant that tourism in Iceland was cheaper and so they got more tourists and Iceland could export more because it‘s exports were cheap. Greece had the Euro along with more economically stable countries like Germany, Italy or France who managed to recover from the Economic Crisis. Greece is quite expensive to tourists and its exports could be cheaper. This is a problem for Greece, even though it is cheaper than France, England or Germany. Greece’s economy is only 60% of what it was in 2008, whereas France and Italy have recovered and Germanys economy is bigger than it was in 2008.

In the 20th century, the Greek State didn’t have a very good tax office and it was easy to get away with not paying tax and though this may have been a small problem then, it has become a major issue for now. With Greece’s economic crash, the unemployment rate was high and with less people working, the Government needed to tax those who worked more to get some money. However, taxing people more makes them leave the country or get a job with lower taxes. As Greece hasn’t recovered from its crisis, others won’t lend it more money because it loses trust. Due to the bad tax office and high spending rate a while ago, Greece has to suffer.

The current Prime Minister Mitsotakis is putting in big tax breaks for new medical companies to move to Greece and start manufacturing. As much as tourism and exports are helping Greece, it can’t be too reliant on it… If something like Covid happens again or there is a natural disaster, Greece might lose 25% of it’s economy… All in all this large proportion of the economy is purely reliant on tourism.

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