Greece Crisis
THE GREECE CRISIS.
So what's the problem in Greece?
Years of unrestrained spending, cheap lending and failure to implement financial reforms left Greece badly exposed when the global economic downturn struck. This whisked away a curtain of partly fiddled statistics to reveal debt levels and deficits that exceeded limits set by the eurozone.Greece was living beyond its means even before it joined the euro. After it adopted the single currency, public spending soared.
Public sector wages, for example, rose 50% between 1999 and 2007 - far faster than in most other eurozone countries. The government also ran up big debts paying for the 2004 Athens Olympics.
And while money flowed out of the government's coffers, its income was hit by widespread tax evasion. So, after years of overspending, its budget deficit - the difference between spending and income - spiralled out of control.
Moreover, much of the borrowing was concealed, as successive Greek governments sought to meet the 3%-of-GDP cap on borrowing that is required of members of the euro.
When the global financial downturn hit - and Greece's hidden borrowings came to light - the country was ill-prepared to cope.
Debt levels reached the point where the country was no longer able to repay its loans, and was forced to ask for help from its European partners and the IMF in the form of massive loans.
In the short term, however, the conditions attached to these loans have compounded Greece's woes.
How big are these debts?
National debt, put at €300 billion ($413.6 billion), is bigger than the country's economy, with some estimates predicting it will reach 120 percent of gross domestic product in 2010. The country's deficit -- how much more it spends than it takes in -- is 12.7 percent.
So what happens now?
Greece's credit rating -- the assessment of its ability to repay its debts -- has been downgraded to the lowest in the eurozone, meaning it will likely be viewed as a financial black
So what's the problem in Greece?
Years of unrestrained spending, cheap lending and failure to implement financial reforms left Greece badly exposed when the global economic downturn struck. This whisked away a curtain of partly fiddled statistics to reveal debt levels and deficits that exceeded limits set by the eurozone.Greece was living beyond its means even before it joined the euro. After it adopted the single currency, public spending soared.
Public sector wages, for example, rose 50% between 1999 and 2007 - far faster than in most other eurozone countries. The government also ran up big debts paying for the 2004 Athens Olympics.
And while money flowed out of the government's coffers, its income was hit by widespread tax evasion. So, after years of overspending, its budget deficit - the difference between spending and income - spiralled out of control.
Moreover, much of the borrowing was concealed, as successive Greek governments sought to meet the 3%-of-GDP cap on borrowing that is required of members of the euro.
When the global financial downturn hit - and Greece's hidden borrowings came to light - the country was ill-prepared to cope.
Debt levels reached the point where the country was no longer able to repay its loans, and was forced to ask for help from its European partners and the IMF in the form of massive loans.
In the short term, however, the conditions attached to these loans have compounded Greece's woes.
How big are these debts?
National debt, put at €300 billion ($413.6 billion), is bigger than the country's economy, with some estimates predicting it will reach 120 percent of gross domestic product in 2010. The country's deficit -- how much more it spends than it takes in -- is 12.7 percent.
So what happens now?
Greece's credit rating -- the assessment of its ability to repay its debts -- has been downgraded to the lowest in the eurozone, meaning it will likely be viewed as a financial black