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The Greek Debt Crisis

Similarly to Lord Byron who travelled to Greece during a situation of crisis, I traveled to Greece during a time it finds itself in another predicament: a debt crisis. Ever since October 2009, Greece has been experiencing a major debt crisis that has profoundly affected its economy. The Greek debt crisis emerged as a result of a combination of three factors. First, Greece's internal structure proved to be extremely problematic (consisting of unrestrained government spending in the years 2000, mismanagement of the economy, political patronage, corruption, bribery, and tax evasion). Second, there are structural defaults within the Eurozone, as highlighted most notably by American economist Paul Krugman.

 

Third, the aftermath of the financial crisis of 2008 played a significant role in the aggravation of the Greek debt crisis, something that many people are unaware of. The repercussions of the financial crisis in 2008 led to a lack of trust in Greece, the country that became regarded as the weakest link within the European Union. This rendered investors less wiling to lend Greece money seeing as it would be incapable of repaying its debts back. 

 

The Lehman Brothers was one of the largest investment banks in the United States that issued many loans (with a given interest fee) to individuals who were unable to pay them back. Many of those loans were then combined to form what is called an "asset-backed security" (ABS), which was sold to various European banks, including the National Bank of Greece, in return for a large profit. The National Bank of Greece was inclined to purchase those ABS' due to the fact that rating agencies such as Moody's, S&P, and Fitch gave them "stellar ratings". That being said, the National Bank of Greece carries the loans the Lehman Brothers had given out, however, as previously mentioned, the individuals who borrowed the money are unable to pay it back. As a result, the Greek economy collapse as the ABS' began to default. After the bankruptcy of the Lehman Brothers, the largest bankruptcy in U.S. history, the Federal Reserve was capable of pumping money into the economy, something that Greece was (and remains) unable to do, seeing as it does not have its own currency. As a member of the European Union, Greece is being assisted by the Troika and other European countries, however, there are many disputes that arise surrounding whether this aid is advantageous to Greece. 

 

In 2010, the first bailout package was granted to Greece, however, it did not lead to any significant results in terms of relieving the country's economy. In 2012, Greece received a second bailout package in exchange for the implementation of austerity measures. The country was required to reduce government spending, increase retirement age, decrease the salary of federal employees, etc. This led to various union strikes and citizen riots, which appeared to worsen Greece's society. 

 

In 2015, Syriza, Greece’s radical left, was elected for the very first time in history. Professor Anastassiadis' Analyze Greece: Explaining the Greek January 25, 2015 elections in 10 questions presentation is an excellent read that thoroughly explains Syriza's rise to power.

 

Research Question

There appears to be a lot of debate in Greece surrounding the crisis. A fundamental question that arises, which I further explored, is whether the Greek crisis is a homogenous phenomenon. Are some people more than others affected by the crisis? My project takes into account the spatial variations of the crisis itself. For instance, I explored the differences between countryside and the city, as well as a suburb and the inner city of Athens. 

Prime Minister Alexis Tsipras, and Yanis Varoufakis (who was the finance minister at the beginning of my trip, but who withdrew his position by the end of it), have been on the negotiating tables with their European creditors for quite some time in hopes of reaching an agreement. In the month that I spent in Greece, events escalated rather quickly. I witnessed the announcement of a referendum, the closing of banks, extremely long line ups outside ATM machines in order for citizens to withdraw their permitted $60 euros a day, various protests in front of the Parliament building, etc (which will further be discussed). 

 

 

 

 

 

 

 

 

 

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