A Case Study of the Greece Debt Crisis

Case Study: Greece Debt Crisis
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Case Study: Greece Debt Crisis
Abstract
A debt crisis occurs when a country cannot sustain its economy while at the same time paying both internal and external debts (Serafein, 2017). The cause of this crisis can be over-borrowing from foreign lenders or overreliance on a single industry to sustain the economy. Before 2013, Greece depended on service sector that supported the eighty percent of the country’s GDP and the remaining sixteen percent was supported by the industry sector. Agriculture only supported an estimate of four percent of the economy. The problem with Greece is that it depended on overspending on paying pensions to the aging population. This paper addresses the causes of Greece’s debt crisis and suggests some of the economic policies that could help the country solve this crisis. While it is not guaranteed that the proposed solution may not be a hundred percent efficient, it is expected that Greece should opt for a solution that can cause the least amount of damage to its ailing economic stability. The real solution to this crisis lies in the economic reforms that support the adoption of the value of liability and the value of assets such as the International Financial Reporting Standards (IFRS) (Serafeim, 2017).
Introduction
The Greek debt crisis refers to the huge amount of money that Greece owes other countries in the European Union (EU) (Armadeo, 2018). While it is true that a country can borrow to sustain its economy and development programs, every government that opts for borrowing has to make sure that the borrowed amount is spent appropriately. Greece’s debt crisis is tied to both the economic and political policies that have failed to take into consideration the huge debt that the country owes the EU. Greece has different potential solutions to its problems, even though these solutions do not guarantee that the country will break free from the debt crisis that has had adverse effects on its citizens. The Greece debt is already unsustainable. The only intervention that Greece deserves is to be forgiven the debt before the country decides to default. On the other hand, the lenders are focused on defending the stability of the euro by lending additional funds at cheap interest rates with the hope that Greece will stabilize and pay its initial loans.
Problem statement
Greece can only embark on the path to economic recovery after it has paid off its debts. The other option is to default on the debts it owes the Eurozone. According to Mavridis (2018), Greece cannot extricate itself from this crisis through defaulting. Defaulting occurs when the country is not in a position to pay its debts. However, before delving into analyzing the cause of this crisis, it is important that one understands what led to the crisis. During a good time when the country’s economy was stable, the government borrowed billions of money from the Eurozone (Serafeim, 2017). The problem is not all about borrowing, but the economic policies that did not provide the government with the procedures and methods of tracking how the funds were used. As a result, a significant amount of money was stolen due to lack of proper IFRS. When Gree...