Tuesday, February 21, 2012

Hello Greece.

Greece was about to go into default if it wasn't for a 130 billion euro bailout. The 17 countries that make up Europe came together and talked for 12 hours and came upon the agreement that would financially reinstate Greece back into the country. The news of the GDP of Greece's debt projected to come down by %120.5 by 2020 lead to an increase in the value of the euro. If it were not for this deal, Greece was going to face a very bad situation and possible relocation from the eurozone. But why would Europe want to kick out Greece? This is because Greece is not only hurting from its economic downturn, but it is also hurting the rest of the eurozone since they all use the same currency. It is not a surprise that Greece's private investors were asked to take a hit on their high interest rates dropping the face value of return by %53.5. The high interest rates on loans that Greece took out for expenditures were very burdensome and took a toll on the country's economy.


Alex D. said...

We both discussed the same topic this week... Not surprising given the severity of the situation, in addition to nonstop media attention.

I agree to your final point: the creditors' interest rates were totally unreasonable and reckless given the average condition of the Greek economy. Hopefully in the future, Creditors will be partially responsible for their loans as well. If investments are merely calculated spending in expectation of a higher return, the loaning party should be aware that the debtor may not have the ability to pay them back completely.

Overall, nice job. I liked projected stats you included. The only facet we may debate on is that Europe would remove a country from the eurozone. While it was discussed as an option at the height of the economic crisis, kicking Greek off the currency could do more harm than good. The temporary fix for the EU's economy could lead other countries to believe their stake in the EU is not set in stone. Either this spurs the economy and pushes production, industrialization, new hires and etc., the political trickle down could reverse the recent recovery in the international economy, sending us back into a spiraling depression.

Who knows, you know?

Darcy said...

Greece's current state of riots and panics does not help their situation any, either. The government faces extreme pressure from its citizens, who are all outraged that a significant number of jobs were recently cut from programs. As people are taking to the streets, Grecian officials become more and more nervous about the state of their country.

The EU has even more reason to be nervous, however. 130 billion dollars might go to complete waste, just as the last stimulus did. Greece might simply be in the trough of the business cycle, but as of now, recovery by any means appears to be off in the distant future.