Greek Debt Crisis | Few Things You Should Know
Greece, a country located in the southeastern Europe, which was famous because it was the birthplace of the Olympics and today it is facing a great financial trouble. The country has to pay debt of about 1.5 billion Euros to International Monetary Fund making Greek debt crisis more worsen. When journalists asked the Greece’s Finance Minister Yanis Varoufakis that when will they repay the debt, he replied that the country would not make the deadline now for a key payment to the IMF.
In order to understand about this crisis we should first look at some of the events that had occurred previously due to which Greece is facing such crisis. Greece was the 12th country to join the European single currency, ditching its former currency drachma. The euro was launched on January 1, 1999 and it became the currency of 11 Eurozone member countries. At that time Greece failed able to meet the European Union’s economic criteria. In the year 2009 Fitch downgrades Greece’s credit rating to ‘BBB+’ from ‘A-‘. This was the first time in a decade that the Greece’s rating fell below the ‘A’ status. Greece got a financial aid package of around $146 billion from the IMF and European member states in the year 2010. Since then, Greece has received two bailouts worth $268 billion. In the year 2011 Private owners of Greek bonds accepted a 50 per cent write-down on their investment, enabling both a 100 billion-euro cut in Greece’s sovereign debts. Furthermore, in the year 2014 Greece ended its 4 year exile from market borrowing.
It was in the year 2015 when Left-wing party Syriza wins elections, raising some concerns about the bailout program. Prime Minister Alexis Tsipras vows to end the tough austerity measures. Also, Greece secured a four-month extension of its financial rescue when its euro zone partners approved a reform plan. The reform proposals included controlling public spending and cracking down on tax avoidance.
On June 4, 2015 Greece delayed the repayment of debt to the IMF and said it would bundle for payments due in June into a 1.6 billion euro lump sum payment due on June 30. In order to prevent a collapse of its financial system Greece ordered closure of banks for about a week and restricted withdrawals from ATMs at 60 euros per day. However, up to 1000 bank branches will reopen from Wednesday to allow pensioners, many of whom do not use bank cards to withdraw up to 120 euros.
A referendum is due to take place in Greece on Sunday, July 5, 2015 over whether the country should accept the creditors’ proposals or not. EU leaders have warned that if Greece rejects the proposal then they have to leave the Eurozone. However, the EU has no mechanism for a country to leave the euro as it has never happened before. Now, let us see what will happen next and whether Greece will be a part of the eurozone or not.