Greece played a central role in the European debt crisis - Europe's debt crisis began in late 2009 at the same time Greece revealed that every year it was underreporting budget deficits, those deficits accrued until the country was no longer capable of carrying the debt. Greece went on to become the first country to receive a bailout from the continent. Between 2008 and 2012 ppp gdp shrunk by nearly 25% (similar to the US great depression when American gdp shrunk by just under 30% in only 5 years).
Staggering Statistics : 65% of people younger than 25 are unemployed / 27% for all cohorts. 2Q2013 Greece gdp -4.6% q2q. quarterly gdp growth isn't expected until 2015 at the earliest.
gradual increases in spending cuts and tax is helping public institutions but hasn't done anything for the private institutions as of yet.
While much of the Eurozone is recovering faster than Greece there are a couple notable exceptions
- In Cyprus, gdp is shrinking at a record pace - expected to be -13% 2013 through 2014. consumer confidence is at a low thanks to the seizure of a portion of public bank deposits. the collapse of its banks has been blamed on the Greek government which defaulted on its bonds.
- Spain's unemployment @ an EU high 26% but gdp contraction has been reduced to under 1.0% (-0.5% 1q2013) .
- Italy's quarterly gdp growth numbers have been negatives for eight consecutive quarters (2q2011 -> 2q2013), Italy public debt =1.3X gdp. unemployment @ 12%.
- 2q2013 Portugal reported its first quarterly gdp growth in 11 quarters but gdp is still expected to shrink by -2.3% in 2013 before growing +0.6% in 2014. unemployment @ 17%.
What exactly is Greece doing to cut spending, reduce the deficit and pay back its Creditors?
Pensions: 1. 15% of any amount over 1200 euro will be taken away (ie €2000 pension will be lowered to €1880). Only about half a million Greeks receive pensions valued over 1200 euro. 2. Pensions going to people younger than 55 will lose 40% of any amount exceeding €1000 and another three million pensioners will be affected by auxillary pension cuts of up to 50% (that loss is just the beginning for those three million because their pension funds are already insolvent). When people retire they sometimes receive lump sum payments, that will be lowered anywhere from 20% to 30%.
Taxes: Taxes will be rendered on 855,000 low income earners for the first time ever after the tax income threshold was lowered from €8 to €5000 (annual gross income). There's also a reduction in the tax-free allowance from 12 to €8,000 that will levy an additional €700 in annual tax burdens on those Greeks affected. Net monthly pay lowered by €150 as early as next month for nearly all of the salaried taxpayers represented among the 855,000 people affected.
On Sunday October 2, 2011 the Greek cabinet completed a plan to reduce staff in the civil service by 30,000 overall. (KCTV5: Greek deficit projected at 8.5% of GDP) That figure seems unfathomable considering the public transport employee representatives stated on September 22 that their staff is already low, 20% lower than it was just a couple months earlier.
here is where Greece is coming from. Last year they had 800,000 civil servents collecting $48,000 annually in full pensions, they become eligible for that at age 52. New austerity measures are likey to impact those people significantly.
European banks typically leverage about 80 times (debt used to acquire additional assets), that puts the EU in a more preciarious situation than the United States where leverage is 40 times leverage.
Third Quarter of 2011: Unemployment is at 17.7%. Between May 2010 and December 2011 Greece took on a total of €110 billion ($143.4 billion) in loans provided by both other eurozone countries and the IMF. Gold company Eldorado Gold promised to spend $2 billion in Greece and create 2000 jobs over the next couple years as it ramps up construction at gold projects in Stratoni.
Fourth Quarter of 2011: The major rescue institutions in Europe (IMF, EFSF) called the Greek situation untenable meaning that Greece can't avoid a default because austerity measures still needed will be too much for the country to handle. France was downgraded to AA from AAA by Standard and Poor's. That's a bad position for the country to be in considering it recorded 0% gdp growth in 2011. Also to consdier, in October Sarkozy said that he would do everything he could to defend France's AAA credit rating.
Economy: Greece accounts for approximately 20% of the world's production of olive oil, that makes it the 3rd leading source after Italy and Spain. China is an important export destination for olive oil, with demand there up 60% in 2010 & Greece contributing 7% of the country's needs (90% of Chinese olive oil comes from Western Europe with Spain and Italy accounting for roughly 80% of it). Countries with large populations aren't the only source of industry growth; Australia has recorded a 20% increase in consumption in just two years.