by Chelsea DeVries
On July 7, 2015, Greece’s stock market crashed so bad that the whole world heard the echoes, and the news and everyone around the world began to panic. The reason Greece is such a hot mess right now is because of the debt crisis that began after Wall Street imploded in 2008. In October 2009, Greece announced that it had underestimated its own financial figures and was shut out from borrowing from other financial markets. Greece began to veer toward bankruptcy.
The International Monetary Fund issued two separate bailouts for Greece. These two bailouts were made in order to avoid complete calamity regarding Greece’s financial state. The two bailouts are said to total 264 billion dollars at today’s exchange rate or 240 billion euros. The bailouts though had strict limitations such as budget cuts and tax increases.
Unfortunately, the steep amount of bailout money they were granted only ended up paying off Greece’s international loans instead of making its way into the economy and stimulating it. The money did help, but did not rid Greece of its economic crisis. In five years, the economy shrunk by a quarter and unemployment has increased by 25 percent.
The good news is that this crisis doesn’t really affect any other country in Europe, mostly because they sold any Greek bonds they had so as not to become affected by Greece’s financial crisis. China’s recent slowdown is affected by the weakness in Greece. Not only does the European debt crisis directly affect American exports, it impacts other areas of the global economy, which further impacts on growth here at home. The European debt crisis and recession affect American exports and the stock market. There are consequences for global trade and possibly for the American financial system as well.
Mostly, Greece’s financial crisis affects our U.S. job rates. Their economy provides us with jobs and, in turn, this debt crisis affects our unemployment rates further. In the short term, Greece still owes 24 billion euros to the International Monetary Fund and the European Central Bank. This obligation may cause further challenges because these two institutions may not be able to hold off on waiting for repayments and this amount will be due by the middle of 2018. Right now, they don’t have to make repayments for both their bailouts until 2023 so by this time, hopefully Greece’s economy will have turned around enough that this amount will not seem as daunting as it does today.
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