Greece economy

Greece Finance & economy

Greece's debt and deficit crisis is placing increasing pressure on the stability of the euro, the common currency of the 16-nation eurozone bloc. Global economic recovery can still be thwarted by unemployment and growing fiscal debts, according to IMF head. Economic experts are still a little doubtful of global recovery as there are some factors which can derail the progress.  Greece has finally asked the European Union and the International Monetary Fund (IMF) for financial assistance to help the country out of its debt crisis.

The move comes after weeks of delicate negotiations and fevered market speculation about if and when Greece would be forced to ask for help.

Greek Economy on You-tube

International monetary fund and greece

IMF is extending help to countries around the world, after the global downturn started in 2007. It disbursed loans of $2 billion to Latvia and $16 billion to Hungary in 2008. It is now helping Greece with a $20 billion package to help manage its debt- stricken economy. After senior Greek and IMF staff held negotiations to bail out the country, it has been reported that IMF is encouraging Greek government to develop a sound economic reform package and provide support for the regeneration of the economy. IMF officials replied that they are present to help put Greece on the path of economic recovery

The economy of Greece is the twenty-seventh largest economy in the world by nominalgross domestic product (GDP) and the thirty-third largest by purchasing power parity, according to the data given by the International Monetary Fund for the year 2008. Its GDP per capita is the 26th highest in the world, while its GDP PPP per capita is the 25th. Greece is a member of the OECD, the World Trade Organization, the Black Sea Economic Cooperation, the European Union and the Eurozone.

The Greek economy is a developed economy with the 22nd highest standard of living in the world.[5]The public sector accounting for about 40% of GDP. The service sector contributes 75.7% of the total GDP, industry 20.6% and agriculture 3.7%. Greece is the twenty-fourth most globalized country in the world and is classified as a high income economy.

2010  Greece debt crisis

See also: 2010 European sovereign debt crisis

In the first weeks of 2010, there was renewed anxiety about excessive national debt.

Some European think-tanks such as the CEE Council have argued that the predicament some mainland EU countries find themselves in today is the result of a combination of factors including over-expansion of eurozone, a condescending attitude of Northern Europe political elites towards southern Europe, and a combination of the worst traits of Keynesian profligacy with rigid monetarist doctrinism, pursued by local policy makers and complacent EU central bankers.[26] Many economists have recommended the imposition of a battery of corrective policies to control public debt, such as drastic austerity measures and substantially higher taxes.

Some senior German policy makers went as far as to say that emergency bailouts should bring harsh penalties to EU aid recipients such as Greece or Ireland. However, such plans have been described as unacceptable infringements on the sovereignty of eurozone member states [27] and are opposed by key EU nations such as France.

Also, there has been harsh criticism against speculators manipulating markets: Angela Merkel has stated that "institutions bailed out with public funds are exploiting the budget crisis in Greece and elsewhere" [3].

On the 23 April 2010, the Greek government requested that the EU/IMF bailout package be activated.[28] The IMF has said it was "prepared to move expeditiously on this request."[29] The size of the bail out is expected to be €45 billion ($61 billion) and is expected to take three weeks to negeotiate, with a pay out within weeks of €8.5 billion of Greek bonds becoming due for repayment.

ECONOMY AND  EURO ZONE

Greece adopted the euro as its new common currency in January 2002. The adoption of the euro provided Greece (formerly a high inflation risk country under the drachma) with access to competitive loan rates and also to low rates of the Eurobond market. This led to a dramatic increase in consumer spending, which has given a significant boost to economic growth.

Between 1997-2007 Greece averaged 4% GDP growth, almost twice the EU average. As with other European countries, the financial crisis and resulting slowdown of the real economy have taken their toll on Greece’s rate of growth, which slowed to 2.9% in 2008. Outside analysts like the International Monetary Fund (IMF) and the European Commission project Greece’s economy to shrink by as much as 1% or 2% of GDP in 2009. Key economic problems with which the government is currently contending include a burgeoning government deficit (5% of GDP in 2008) and increasing public debt (94.6% of GDP in 2008). The EU recently placed Greece under its Excessive Deficit Procedure and has asked Greece to bring its deficit back to the 3% EU ceiling by 2010.

Economy (2008)
GDP: $371.2 billion.
Per capita GDP: $33,440.
Growth rate: 2.9%.
Inflation rate: 4.2%.
Unemployment rate (annual average): 7.5%.
Natural resources: Bauxite, lignite, magnesite, oil, marble.
Agriculture (5.4% of GDP): Products--sugar beets, wheat, maize, tomatoes, olives, olive oil, grapes, raisins, wine, oranges, peaches, tobacco, cotton, livestock, dairy products.
Manufacturing (21.3% of GDP): Types--processed foods, shoes, textiles, metals, chemicals, electrical equipment, cement, glass, transport equipment, petroleum products, construction, electrical power.
Services (73.3% of GDP): Transportation, tourism, communications, trade, banking, public administration, defense.
Trade: Exports--$24.4 billion: manufactured goods, food and beverages, petroleum products, cement, chemicals. Major markets--Germany, Italy, France, U.S., U.K.Imports--$88.5 billion: basic manufactures, food and animals, crude oil, chemicals, machinery, transport equipment. Major suppliers--Germany, Italy, France, Japan, Netherlands, U.S. 

All this disorganization has the potential to undermine the credibility of the euro, which has been remarkably steady during the last two years of international financial turmoil.

The Frankfurt meeting of ECB governors decided to leave unchanged the basic interest rate at the historic low of 1 percent. This is very much a compromise that illustrates the differing pressures that could theoretically grow so strong as to rupture the euro pact between participating countries.

The low interest rate is needed by Greece, Ireland, Spain and Portugal to stimulate growth in their near-paralyzed economies. But it could fuel inflationary tendencies in the stronger eurozone states, such as Germany and France, which have emerged from recession and are growing again.

And responding to hints that Athens should withdraw from the eurozone, Papandreou has firmly rejected that possibility. No mechanism exists for countries to resign from the zone, and politically it would be a very difficult decision for the European Union to take.