Greece Crisis: Latest news and updates

Abstract 

As a result of the economic crisis, Greece was able to incur substantial financial debts which ended up being unmanageable hence causing enormous financial implication in the market. Initially, Greece was considered a high-income economy with a dominant financial status in the region. The country experienced increased economic growth due to stable economic factors and policies in the market. In 2009, Greece economy experienced a financial crisis where the government indicated that huge debt incurred had become unmanageable in the marketplace. Majority of financial institutions had granted financial obligation to the country where there was an increase in interest that resulted in an inability to repay. By 2010, the public debt was estimated to be 120% of the total GDP. There was a lack of international confidence within Greece hence inability to repay its sovereign debt. 

There was bailout plans which were set in place which were commissioned by the European Commission with w total of 80 billion Euros. The disbursement of loans from major creditors to the Greek government in aim to restore the economy. There was an aim to reduce the debt level to ensure that there is a growth of GDP. Through the support of other international bodies, Greece was committed to resolving the sustainability of its debt which would help to ensure financial stability in the market. A part of the reforms to restore and reduce debt level, the government has maintained a primary surplus of 3.5% of the total GDP until 2022. Finally, the medium-term debt measures agreed by Eurogroup and cash buffer that was provided to the Greek government would help to offer enough and needed support to the country making the debt sustainable in the long run. 

Greece Crisis 

Introduction 

Between 2008 and 2009, the Greece Government was faced by a severe financial crisis which was caused by an increase in a sovereign debt crisis in the region. The country's economy suffered one of the most prolonged recessions in the advanced economy. The Greece crisis was mainly caused by turmoil of the Great Recession due to lack of stable monetary policy in the region. In 2009, the public debt increased where the debt to GDP ratio was 127% to 179% in the area (Gómez-Puig & Sosvilla, 2016) . The crisis resulted in a budget deficit, reduction in government spending as well as a high level of tax evasion and corruption. To solve the problem, there were a few bailout exercises which were conducted by the European Commission and IMF in a bid to restore financial status in the market. The bailout loans granted was mainly used to pay for all the maturing bonds hence ability to finance the deficit budget. 

Problem Statement 

The Greece debt was a severe amount of sovereign debt which Greece owed the European Union since 2008, and in 2010, Greece was unable to pay its debt which resulted in an emergency of the financial crisis (Tsebelis, 2016) . To avoid Greece defaulting the loan, the European Union was able to loan Greece some amount of credit to continue making regular payments in the market. More than 320 billion euros have been loaned to Greece from major international financial institutions. 

The Greece Government was able to admit that the national government statistics were manipulated and now the government was trying to revise the deficit numbers upwards. The country's economy was ready to suffer from competitiveness deficit which was able to affect the economic growth and social growth. Greece has weak institutions compared to other countries where the government had poor governance practices that reflected a high level of corruption and misappropriation of funds. 

All the bailout were provided with harsh conditions where lenders imposed strict austerity terms where there was a need to have deep budget cuts as well as steep tax increases. Tax increases were aimed to increase the national income of the organization which would help to provide the best source of finances for the organization. Despite receiving enough financial bailout and support from the IMF and European Commission, the country has continued to be in the current economic crisis in the region. The bailout money was mainly used to pay the enormous international loans that were granted hence lack of finances to support government spending and development in the market (Tsebelis, 2016) . The problem has therefore impacted negatively on the economic growth of the country making most of the investors leave the market for fear of poor financial performance in the market. 

Analysis and Findings 

Greece Debt sustainability requires more review which will help to shed more light on the possible conclusions and recommendations for the problem. After more than years of increased economic recession, there was disagreement concerning Greece debt level despite the bailout plans made by the EU and IMF. The situation was however made worse with the announcement in 2015 that the government would adopt various accrual accounting and international accounting standards . From regular World Bank reports for 2013, Greece was ranked 43 rd to 51 st as the largest nation with debt crisis across the globe more than $242 billion. Mainly, Greece economy revolved around the service sector which accounted for more than 80% while agriculture accounted for only 4% in the marketplace (Tsebelis, 2016) . It, therefore, means that there was still lower income generating activities within the region which resulted in an inability to generate enough revenue to support government debt repayment. Despite the debt crisis, Greece was always one of the best tourist attraction sites in the region. The country experienced week institutions compared to other countries as well as poor practices of governance that caused high corruption level and tax evasion. Ineffective functioning of the courts meant that it was not possible for the government to prosecute corrupted government officials. 

The Greece debt started straightforwardly were between 2001 and 2007, there were huge inflows of euros to Greece country, and despite all these financial earnings, the nation still faced some severe debt issues which generally affected the financial stability of the country. Due to the budget deficit which was caused by an increased level of spending, their government lacks enough funds to repay the current debt and finance government projects. There was an also increased inflow from foreign direct investment wherein 2006 it was $ 5357.9 million while in 2008 it was $ 4489.9 million which allowed the country to generate income and create employment (Tsebelis, 2016) . Within the government, there were some loopholes such as early retirement options which meant large payment from the government revenue. As a result, there was a generation of the sunk cost that impacted negatively to the financial stability of the organization. 

By 2009, the level of the deficit was at 15.3% which was the highest over the years with the general government debt at 134.6%. Budget deficit and poor financial performance created limited interest for the investors within the region (Tsebelis, 2016) . Also, in 2009, the tax revenue was the lowest since there were a high number of tax evaders in the area who preferred to use cash transaction than a bank. As a result, most of the credit rating agencies were very uncertain about the country's debt conditions which were able to downgrade the credit rating in the market. 

After the emergence of the Greek Crisis, structural weaknesses, the Greek economy and lack of political, monetary flexibility increased the Great Recession. The crisis indicated widening on bond yields spread which also raised the risk of insurance on credit default swaps as paralleled with other Eurozone countries. 

As an international concern, various bailout programs were introduced in the market where the first program was conducted by Euro group which agreed to offer bilateral loans which were pooled by European Commission to a total 80 billion euros which were disbursed from 2010 to 2013 (Psychogios, Szamosi, Prouska & Brewster, 2019) . However, the program needed the necessary approval from the parliament of various Eurozone member states for financing approval. The loans were granted to the Greek government where various creditors required their full payments. Creditors required that Greece needed to implement a series of reform such as making the labor market more and better flexibility as well as reduction of bureaucracy (Tsebelis, 2016) . Another significant restriction indicated that the government required reducing the high level of spending through a decrease in salaries of all the public officers as well as a decrease in pensions. It was a perfect strategy which aimed to ensure that the government was able to overcome a substantial financial crisis within the region. There was also a need to increase direct and indirect taxation through an increase of tax rates on real estate and other sources of wealth (Psychogios, Szamosi, Prouska & Brewster, 2019) . Expansion of tax rates was a very strategic measure that would help in ensuring that more revenue generation was acquired. These austerity measures were aimed at reduction of debt level, increase in competitiveness as well as restoration of the Greek economy in the region. 

The second bailout program was conducted in 2012 where Eurozone members were able to approve second financing for Greece. IMF contributed to the economic empowerment which would also help to restore the financial status of the country in the region (Psychogios, Szamosi, Prouska & Brewster, 2019) . Just like the first bailout, the second program also required the approval of the respective parliament in the area. By the end of 2014, the second bailout contributed more than 164.5 billion euros which helped to improve financial sustainability in the market (Tsebelis, 2016) . Also, as part of the second bailout, one of the main conditions set was that there should be an increase in private sector involvement which would help to boost the sustainability of Greece debt in the market. The level of government spending was also reduced while taxation rates increased to help the government come up with a reliable source of finance and revenue (Tsebelis, 2016) . IMF also fully supported the bailout process which also helped to attract more investors hence new bonds issued at a better value. 

Government bonds issued to the private sector had a yield to maturity of 15% as at 2012 which traded at a positive value in the market (Pragidis, Aielli, Chionis, & Schizas, 2015) . It is therefore clear that the Greece debt crisis is sustainable due to various bailout processes that took place in the region. The Greece government was also interested in solving the financial crisis in the area where it was considering a specific debt reduction measures which were part of debt buyback operation. The buyback was conducted in 2012 which used more than 11.3 billion euros from the loans granted to issue some of the government bonds hence it was able to reduce the debt value by more than 20.6 billion euros (Pragidis, Aielli, Chionis, & Schizas, 2015 . The issuance of government bond also contributed to the sustainability of the high debt value in the region which also helped to have the debt on a sustainable path. 

Accounting Practices Analysis and Findings 

For a long time, Greece has had a long history of inability to apply accrual accounting within the country. For example, some in 1992, the ministry of the economy announced that all major state agencies would enforce accrual accounting policies which never happened in the long run. Failure to use and adopt the necessary accounting policies and standards can also be attributed to huge debt incurred in the region. The European Commission significantly acclaimed that Greece should embrace IPSAS, but by 2015, the preparation of the country’s financial statement was yet to conform to IPSAS requirements (Psychogios, Szamosi, Prouska & Brewster, 2019) . There was a suggestion to start training government accounting officers accounting application of International Financial Reporting Standards (IFRS). Many people believed that lack of use of the necessary accounting standards caused terrible governance, mismanagement as well as lack of accountability in the government institutions. 

For a long time, Greece has not been able to adopt proper accounting accrual and international standards it was therefore not able to report the actual value of its liabilities or assets according to IPSAS or other international standards such as GAAP (Tsebelis, 2016) . Greece was accused of not using the relevant accounting standards such as International Financial Reporting Standards (IFRS) and IPSAS which helps to ensure that the financial statements are accurate and fair in the market. These standards also help to ensure that the Greece government was able to account for all the revenue and expenses hence creating a high level of transparency and accountability in the region (Tsebelis, 2016) . The Greece crisis caused huge financial issues which resulted in a 15% drop in the value of the euro ( Serafeim, 2017). Greece also failed to use the fair value method in the valuation of its assets which created more risk and substantial financial implication. 

IFRS and IPSAS were able to offer the same guidance concerning substantial modifications to all the current liabilities within the country. Also, IAS 39 and IPSAS 29 was also able to define the necessary exchange between the borrower and the lender of debt with different terms (Pragidis, Aielli, Chionis, & Schizas, 2015) . In 2015, January, there was an election held, and a new government elected where the citizens were dissatisfied with the old government due to financial impropriety and lack of any progress towards the fight against corruption ( Serafeim, 2017). Corruption was a severe vice in the society that required urgent solution since most of the public funds were embezzled through that channel. The old government was still imposing new taxes which again would not be accounted for in the market. With the election of the new government, it promised to cut on debt and ensure the country's creditors were into an agreement to cancel all the existing austerity measures. With the formation of the new government, more rules and policies were put in place which helped to ensure that the vast debt level was controlled for the welfare of the citizens in the region. 

Recommendations to Greece Debt Crisis 

For many years, Greece has excellent financial stability and good economy where many people enjoyed excellent living standards in the market. Tourism was growing very fast as well as the general prosperity which expanded very fast in the market (Psychogios, Szamosi, Prouska & Brewster, 2019) . Due to the increased budget deficit in the market, the Greece government continued to borrow billions to help the country grow and finance its projects. It created a substantial financial crisis in the region which called for international economic intervention in the market. There are a few solutions which would be provided to ensure the stability of the country in the market. 

One of the essential measures to curb Greece debt crisis in to implement exact austerity measures where the new government must come up with the original and extra source of funding in the market. Since there are vast withdrawals from Greece banks, the government will have to reduce the salary expenses for all the public officers through a reduction in payment in the market with more than 1500 euros ( Serafeim, 2017). For example, the parliament employees were able to receive considerable salaries in 2011 with more than 3000 euros per month without including the bonuses and other allowances ( Serafeim, 2017). There is therefore great need to cut and reduce the salaries expenses which will help the government to have enough revenue for development projects. Reduction of high salaries will also help to reduce withdraws from banks hence the attraction of investors in the region. The government through pressure from international bodies has the sole role of increasing the revenue sources as well as a reduction of operating expenses. 

To solve the Greece debt crisis, it is essential to implement the right free-market banking within the country as part of protective measures. Assets held by the Greek government in major banks are typically sold off where the government should make a clear distinction between depository institutions and financial institutions (Pragidis, Aielli, Chionis, & Schizas, 2015) . Most of the depository banks usually function like the storage facility where all the customers will be charged a certain fee to store the items. Any attempt to lend loans to such bodies should be banned as considered as a type of fraud in the market. Equity financing should only be available to open and genuine customers in the market. Therefore, customers should be encouraged to hold more money in the banks where lending will also take place which is also a preventive measure in the region. 

There is also a need to institute monetary competition where Greece should consider leaving the euro to prevent further crisis in the market. Greece can, therefore, benefit from competing currencies. It will help the government to gain more in currency competition that will create more revenue stream in the market. One of the surest ways in which the debt crisis in Greece can be solved is through an increase in national income which will help to provide necessary revenue to pay loans and support government projects. 

Another key recommendation is that Greece should try and fix new drachma to gold. Despite gold has many drawbacks, one of its main advantages is that it usually constrains current and future government through the use of printing presses (Pragidis, Aielli, Chionis, & Schizas, 2015) . The constraint helps typically to finance government expenditures in the market hence increase in income diversification. Therefore, through austerity and setting the banking industry free from the euro and other parts of the EU, Greece will help to restructure its financial institutions in the market. The economic recovery of Greece is of great concern to most of the international institutions such as IMF, EU and other member states in the region. 

Another recommendation is that budget cut should be designed in the best way possible to ensure it does not harm the weaker part of the population in an important idea. The budget cut will mainly aim to reduce wasteful spending from the government such as high salaries for military and other public officers (Psychogios, Szamosi, Prouska & Brewster, 2019) . The EU also needs to engage with Greece to take up more responsibility to solve the current crisis. In such a case, there is a need for all the European states to reduce their export of weapons to Greece as a protectionist measure. There is also a need for the introduction of more reforms in the taxation system through an increase in tax rates which will provide enough revenue for the government. The country should also consider the introduction of a levy on wealth to ensure the contribution of significant profits and curb the high level of corruption and tax evasion in the region. The government loses millions of money every year as a result of fraud and tax evasion which is ever accounted for. 

For better and efficient accounting and preparation of financial statements, Greece should adopt international accounting standards such as GAAP, IFRS among others which will help in transparency and accountability in the market ( Serafeim, 2017). The financial statements will, therefore, be prepared following international standards hence ability to compare performance. It will be possible to account for all the revenue generated as well as all grants provided by the international bodies. 

Also, to curb and overcome the crisis, Greece should reduce its current account deficit. Some of the targeted items may include excessive consumption and high wages ( Serafeim, 2017). Low incomes should be spared as it would be anti-social which would hamper domestic demand. Financial and economic policies should also be introduced which will prevent excessive borrowing. For example, with an increase in interest rates, it will make the loans granted expensive to acquire which will limit and hinder the acquisition of loans. In the long run, it will help to prevent bad debts in the region. 

To ensure full recovery, Greece will need to implement a set of green investments since the crisis cost-cutting measures are a burden to the public and private consumption. The European Green Party (EGP) highlights typically the importance of a new investment programme which mainly focuses on green job development for the youth in the region. In the long run, it will help to boost the green economy and other significant incentives for the child. There will be the creation of job opportunities as well as cooperative action that will improve the living standard in the market. 

Since most of the financial markets such as private financial institutions, they have been involved in debt crisis there is a need to come up with more measures in the market. For example, there should be the introduction of financial transaction tax which will tend to limit and discourage excessive borrowing in the market. Implementation of all the above policies will help the country to be stable hence ability to overcome all the major issues in the market. There will be financial stability and better generation of federal revenue. 

Conclusion 

Greece debt crisis resulted in substantial financial challenges to the country since the country was involved in a high level of spending in the country. There were corruption and taxation which caused the country to have a budget deficit in the region. Greece was unable to pay most of its creditors hence the need to seek more financial support from other international bodies such as IMF and EU. The bailout was conducted in two main programs with strict conditions which would help to restore the economic situation in the country. The main aim of the rescue was to reduce the debt level and restore the country to its original status. Lack of ability to use and apply accounting standards in the market also resulted in an increase in fraud cases that required urgent attention in the region. The problem was also caused by a massive increase in the level of government spending such as an increase in salaries within the area. 

There were a few recommendations which would help to curb and control the debt crisis in the region such as the introduction of monetary and economic policies which would help to increase the interest rates that would make the acquisition of interest very expensive in the area. There was also a need to introduce austerity measure to provide an additional source of finances for the organization. Also, there was also a need to institute monetary competition which would provide additional funds when dealing with currency competition. 

Greece should also consider trying to fix new drachma to the gold that will also provide additional revenue to finance government projects. Budge cut and reduction of the current account will also play a vital role in the restoration of financial stability. It will be the role of the EU members’ states to encourage the country to apply and implement relevant accounting standards which will help to curb corruption and tax evasion. 

References 

Gómez-Puig, M., & Sosvilla-Rivero, S. (2016). Causes and hazards of the euro area sovereign debt crisis: Pure and fundamentals-based contagion. Economic Modelling , 56 , 133-147. 

Pragidis, I. C., Aielli, G. P., Chionis, D., & Schizas, P. (2015). Contagion effects during financial crisis: Evidence from the Greek sovereign bonds market. Journal of Financial Stability , 18 , 127-138. 

Psychogios, A., Szamosi, L. T., Prouska, R., & Brewster, C. (2019). Varieties of crisis and working conditions: A comparative study of Greece and Serbia. European Journal of Industrial Relations , 0959680119837101. 

Serafeim, G. (2017). Greece’s debt: Sustainable? Harvard Business School. Retrieved on 19 April 2019, from https://services.hbsp.harvard.edu/api/courses/618994/items/115063-PDF- ENG/sclinks/801eba8bed14903aaafdc46c1751ec24 

Tsebelis, G. (2016). Lessons from the Greek crisis. Journal of European Public Policy , 23 (1), 25-41.