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Overview
Remember the Greek debt crisis from 2010 and how, in 2015, they needed another bailout?
Greece was in a financial crisis that threatened to destroy the country. However, it’s not just Greece suffering from this problem; many countries are facing similar issues. The EU wanted to use Greece as an excuse to gain more power and money for themselves. Yanis Varoufakis, who was the Greek Minister of Finance at the time, will explain how he dealt with these corrupt politicians and what his experience means for us today.
The author reveals that Greece’s problems are not caused by the euro; in fact, bullying and secrecy are common in politics. He also explains how Donald Trump may benefit from this debt crisis.
Big Idea #1: Even though Greece faced bankruptcy in 2010, they were forced by the European Union to take on more debt.
In 2010, Greece was in the news because it received a series of bailouts from the European Union. But how did it get to that point? What were the reasons for these bailouts?
In truth, the Greek economy was already in trouble before 2008. It was just a matter of time before it collapsed because of its weak financial system and government debt.
The Greek economy was in bad shape prior to 2008. The government had been skimming money off the top of tax revenues, and there was a lot of corruption. As a result, the budget situation was out of control.
Greece’s financial crisis is nothing new. The country has always had a hard time managing its finances and often spent more money than it generated, which it then tried to solve by devaluing the currency. When Greece adopted the euro, however, that option was no longer available. Faced with little other choice but to borrow more money from France and Germany (the EU countries who loaned most of the funds), Greece found itself in an even bigger hole when the 2008 financial crisis hit. Meanwhile, Germany’s Chancellor Angela Merkel and French President Francois Hollande were also having their own problems: they had already used up government funds to bail out their banks after those banks lent money to Greece during the economic boom times of 2000 through 2007-2008.
Greece is in a tough spot. It has so much debt that it’s not able to pay back its loans. Germany and France are worried that if Greece defaults, the banks will lose more money, which could lead to another financial crisis. However, the European Central Bank can’t loan money to bankrupt countries because of regulations against doing so. So Merkel and Hollande decided to lie about Greece’s finances by saying they’re solvent instead of insolvent; this allowed them to get a bailout for Greece without breaking those rules.
Greece received another loan to pay off its other loans, and the hole got deeper.
Big Idea #2: Major financial institutions embroiled Greece in a never-ending cycle of debt.
Greece was in a financial crisis. It had to borrow money, but couldn’t because it didn’t have any more cash. In order to avoid the truth, Greece continued borrowing and spending money even though that only made things worse. The European Commission (EC) is one of three organizations that decides whether or not countries can borrow money from other countries. The president of the EC represents the Eurogroup, which consists of all 19 nations who use the euro as their currency.
The European Central Bank is led by Mario Draghi. Its purpose is to manage the euro and keep its value steady. The International Monetary Fund (IMF) has Christine Lagarde at its head. It lends money to countries that need it, making sure they are cooperative in their efforts to avoid poverty and economic instability.
