Detailed Thread About Greek Crisis & Current Scenario

The main cause of the Greek crisis was economic inefficiencies caused by high government spending and public sector embankment. Greece joined the Eurozone and issued the Euro as its single currency in 2001. Following that, the economic situation deteriorated dramatically in the following decades as a result of fiscal debauchery. Fiscal debauchery is defined as an increase in debts and deficits caused by excessive spending. As a result, many people believe that Greece’s membership in the Eurozone was the primary cause of the country’s debt crisis.

As a result of the Greek crisis, the Greek economy is still in a state of recession. The political system was lifted and shattered, and the country experienced increased social exclusion.

 A brief history of Greece & its scenarios:

On January 1, 1981, Greece joined the European Union, which allowed the country to borrow at unadjusted low-interest rates. Following this, the country started to spend their money on the military. As the country came out of the fascist military rule the country embarked on the public sector leading to an economic boom. 

 The country’s financial book records highlighted that the country must avail of more loans to continue its growth and pay off its previous debts to get Greece back to good health.  The mortgage crisis put a lot of pressure on creditors, who suddenly refused to lend to the Greek government. The crisis caused the Greek economy to crumble. Banks went bankrupt, money stopped flowing into the country. Thousands of well educated Greek society left the country, the social exclusion also increased, and internal obligations also angered the masses.

The crisis further led to revelations of underreported data by the Greek government on government debt levels. The official report for the budget for 2009 was less than half the final value calculated in 2010. The crisis led to a rapid loss of confidence in the Greek economy showcased by the raised cost of risk insurance in comparison to other European countries. 

REASONS FOR COUNTRIES SETBACKS:

• The EU  awarded “bailout money” and called for an “ austerity law” to be passed.
• The country required bailout loans in the year 20the 10,2012,2016 despite various measures taken by the government that included spending cuts and reforms.
• As a result of the  “Austerity bill” 15,000 people lost their jobs in public sectors, following which liberalisation of labour law was put forward.
• liberalisation of labour law meant businessmen can easily hire and fire employees.
• The minimum wage declined by about 20%.

IMPACT OF THE CRISIS ON THE  INDIAN ECONOMY

India does not have any direct trade relations with Greece as a result of which there was no direct impact of the crisis on India. If other European countries are caught up in a similar crisis, India’s export will be affected, directly affecting capital outflow and inflow. Here, we will discuss the current scenario of the Indian economy.

CURRENT ECONOMIC STATUS OF INDIA:

The Indian economy is the sixth-largest according to nominal gross domestic product and is the third-largest unicorn base in the world. India’s long term growth perspective is positive owing to its young population and low dependency and global economic integration.

In the year 2020 India has the ten largest trading partners and has free trade agreements with various other nations. 

The rate of employment needed to be increased in India by 1.5% per year from 2023 to achieve a hike in the gross domestic product by 8-8.5%.

In terms of manufacturing generic drugs, India is the largest manufacturer. The Indian IT and chemical sector is also well-diversified.

RECENT ECONOMIC DEVELOPMENT IN INDIA

• An improved economic scenario allowed various investments across other sectors.
• The merchandise exports show an increase of 48.85% between April & December 2021.
• The PMI index (manufacturing purchasing index)is 56.4 as of January 2022.
• The gross good and service tax saw a 15% rise.

Conclusion:

Greece declared in 2010 that it would be unable to repay its debts. The EU provided Greece with loans to continue making payments, resulting in the world’s largest bailout in history. Greece jeopardised the Euro’s long-term viability.

In exchange for the loan, the EU advised Greece to implement austerity measures.

Greece repaid 41.6 billion euros in January 2019. Greece’s debt-to-GDP ratio reached 206.3 per cent in 2020.

The last official bailout was in the year 201, but it is estimated that it would not be enough to pay off debts until 2060.

The Greek debt crisis had no direct impact on India, but if it had happened in any other European country, the currency outflows and inflows would have been similar.

India was not directly affected by the Greek debt crisis however if the same would have happened with any other European country, the currency outflow and inflow would have been harmed tremendously.

Presently the economy of India is a middle-income market economy which is believed to be the fastest-growing major economy.