As the previous post points out, Greece is in trouble. To get out of this trouble (as we talked about in class) they rely on the bonds market. The only way people will finance this spending (by buying their bonds) they need assurances that the spending will get under control. This results in what the media calls "Austerity" movements.
The problem arises when its citizens do not accept the fact that they are basically broke. They need to curb the spending and increase taxes to satisfy the bonds market. It appears as if they are catering to the Wall Street element, but it is really like learning to live within your means. This is the problem going on now in Greece as protests cripple the nation.
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Waiting for that other shoe to drop: Greek debt was underpriced for too long based on risk. The same can be said for a handful of other Euro countries. Default is the punishment for buying bonds that are not priced by how much risk they carry. There is far more risk to the Euro by not defaulting than trying to limp through this mess. Pay so much on the Euro and call it a day, it is time to move on.
ReplyDeleteGreece is a beautiful country with plenty of historic monuments maybe they can utilize the tourism factor to help strengthen their financial problems. Sharon L Schafer
ReplyDeletePanayotis Dounis was right in saying that the measures taken by the Greek government are only going to lead to unemployment, hunger, and poverty. Raising taxes on everything is only going to worsen the problem. Does the government really expect people to spend when they have nothing to spend? It is a downward spiral and the citizens of Greece have all the right to be angry.
ReplyDeleteKathleen White