Will Greece Ever Recover?

There is no exact answer to the direct cause of the EU crisis as many different factors have had an effect. Debts throughout European countries have been growing over the last decade as interest rates remained low and spending increased. Greece however, are a different story. Joining the EU required countries to keep “sound fiscal policies, with debt limited to 60% of GDP and annual deficits no greater than 3% of GDP”. Countries such as Italy, Germany and France were of the first to break the 3% rule. Spain, although now seen as a major concern within the Euro, remained within the guidelines issued up until 2007.

Greece in this case did not ever meet the criteria of the Maastricht Treaty and in fact falsified their data (Statistics of their budget deficit were changed to meet the demand of the fiscal policy) in order to receive entry into the Euro. Once a member, they continued to manipulate their data until it was revealed in late 2009, government debt had reached 300bn euros (129% of GDP). In 2002 the euro replaced all existing currencies of the countries who had joined. Being part of the euro made it easier for them to borrow money and had allowed them to go on a debt-funded spending spree, despite already misrepresenting their current account balance. High-profile projects such as the 2004 Athens Olympics went well over budget, causing public debt and deficits worse than ever before.

Things have gone from bad to worse. Greece’s GDP growth is nonexistent. Hardship has become a serious problem with reports that a fifth of their nation are living below the poverty line. Corruption within their economy has also become endemic. Tax avoidance and evasion is more common and public spending -with an increase in civil servants despite their- grew out of control. Between 2002 and 2008 private debt rose by nearly 100%. Joining the Euro gave them the access to cheap money with very little interest. The increase in their wages fuelled a strong consumer-led growth over the seven year period as the graph shows wages nearly increased by three times the amount they were at in 2000. Because of this, the people of Greece used their savings to purchase normal goods which in hindsight is seen as an impetuous decision.  "A couple of years ago, there were more Porsche Cayennes circulating in Greece than individuals who declared and paid taxes on an annual income of more than 50,000 euros, a figure only slightly above the vehicle's list price". 

The European Crisis is an ongoing debate with many different political, economic and social points of view. Skeptics argue that leaving the Euro would be Greeces best solution while many suggest remaining part of the currency is their only chance of recovering from such states of depression. Would following guidelines similar to Latvia’s severe austerity programme help Greece recover from the state they find themselves in now, or are things too late?