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Financial Crisis in Greece Case Study

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Updated: May 7th, 2022

The Euro Crisis, which has turned out to be one of the worst crises in the region’s history has affected almost every country, directly or indirectly. However, the Euro Zone countries have largely felt the effects of this crisis, which has persisted beyond the expectations of many leaders, with several measures being considered to mitigate its effects. One of the countries, which have largely suffered as a result of the crisis, is Greece. This essay discusses the Financial Crisis in Greece, highlighting some of the causes and measures, which have been undertaken in recent months.

The financial crisis in Greece was caused by efforts to expand the public sector during the reign of Andreas Papandreou as the Prime Minister. During this time, the Prime Minister championed the interests of his country within the European Community, resulting into grants and agricultural subsidies (Belkin 2011). He also awarded favors to several disenfranchised social groups and trade unions, which had previously suffered. As a result, the deficit of the Greece accumulated as the government sourced funds to sustain the public sector.

Additionally, the financial crisis has been attributed to excessive borrowing, which rose to alarming levels in early 2000s, after the country adopted the Euro as its currency. This considered as the main cause of the crisis as Greece’s debt became unsustainable in 2009. Other factors include corruption, inefficient public sector, progressive tax system, and uncompetitive economy. As a result, several measures have been undertaken to save the country’s economy. For instance, the European Union and the IMF have been on the frontline in offering rescue packages since 2010. Moreover, the government has stepped-up its efforts in fighting corruption, tax evasion and improvement of the economy. In recent days, several austerity measures have been approve by lawmakers, including wage reduction, raising the retirement age to 67 and lowering benefits (Belkin 2011).

Time value of money

It is doubtless that the value of money is essential in determining a number of factors like the stability of the economy and inflation. Based on the current value of money, some people may opt to be paid in future because of projected high value of money. On the other hand, there are moments when the value of the same amount of money today could be much higher than that of the same amount in the future. This is generally referred to as time value of money, commonly abbreviated as TVM.

Time Value of Money plays a major role in explaining the finance theory and is widely considered as a major tool in carrying out a wide-range of calculations. In fact, it is regarded as the basic foundation of almost all financial notions in the market. In essence, the impact of the time value of money is normally felt when dealing with government, business, and consumer finance. It therefore emanates from the idea of interest, which is the pillar of finance (Friedman & Harris, 2006). In its application, TVM is important in establishing the trends, which are likely to be experienced, especially when evaluating the income stream of an individual or a group of people. It is therefore applied in calculating the present value of an annuity, the present value of perpetuity, and the future value of annuity. These equalities are usually obtained using programs, which have been designed to simplify them and give future predictions, with regard to the value of money.

References

Belkin, P 2011, Web.

Friedman, P & Harris, J 2006, Keys to Mortgage Financing & Refinancing, Barron’s Educational Series, NYC.

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IvyPanda. 2022. "Financial Crisis in Greece." May 7, 2022. https://ivypanda.com/essays/financial-crisis-in-greece/.

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IvyPanda. (2022) 'Financial Crisis in Greece'. 7 May.

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