Could someone please explain the Greece situation to me?

I'm confused! TIA

I'm confused! TIA

Around the time of the 2008 recession, the German and French banks handed out a number of risky loans to Greek businesses/banks. Soon the Greek banks/businesses realised they would not be able to pay back the debt, and were on the verge of default. The first government that was in power in Greece was a right-wing govt and they got loans to prop up the greek banks (and to pay back debt) , and in return the govt would find ways to repay the risky loans through austerity measures: by spending less and taxing the people more, even though those people never directly benefitted from the loans.

The Greeks then threw out that government. Instead they put forward a socialist govt Tsiriza that decided they would no go forward with austerity, but instead try to get loans from the iMF, the Germans etc. However, they had no intention to extract the money for the debts from the people. With mounting pressure, and no further loans forthcoming from the EU, Greece had to default on its IMF loan payments.

But it is one of the first Western European countries to do so, and this brings with it fear: fear that they may default on further loans, fear that because of this they may be forced to leave the Euro and all the Euro denominated money in Greek banks becomes worthless, fear that Greek banks may not be propped up. As a result, many depositors have been withdrawing cash from the banks to the extent that banks might not have any money to issue to the public. That's where the real panic begins. To stop this, the govt put capital controls that stop depositors from bleeding the banks dry.

However to stave of criticism from their detractors, the current Greek govt declared an election on whether there should be more austerity and a possible Euro exit or no more austerity. The public voted for no austerity and this gave the government a mandate to not go through with austerity and to possibly exit the euro . However, with runs on banks becoming more likely and no German money to save Greece, it is most likely they will have to leave the EU.

Leaving the euro is probably the best thing for Greece, because there is no way in hell they can pay back 200% GDP. However, this is bad for Germany and France as it leaves their bank debts unpaid and may lad to investor/ banking scares in their countries.However, once the Greeks transition to their own currency, they need to restructure their economy and think about austerity.

(Greece had more spending than revenue for 35 years straight)

> Greece is ****ed

Around the time of the 2008 recession, the German and French banks handed out a number of risky loans to Greek businesses/banks.

Alright, let me try to offer as fair an overview as I can here.The Greek government proposed to hold a referendum - a form of direct democracy in which the people vote not to elect a representative, but instead to demonstrate support for or opposition to a particular idea. Some referendums are binding - the results must be acted on by the government as though they were law. Others are more symbolic in nature, intended to show a mandate - the will of the people - to act as the referendum results indicate. The Greek referendum was the latter type.This referendum was on the latest round of bailout proposals from the major creditors of Greece to the Greek government, asking the people whether they should accept ("yes") or reject ("no") these proposals.Officially, the "no" vote means the Greek government has the support of a majority of its people to reject the terms of the bailout proposals and continue negotiating for more favorable terms. In practice, it means that the Greek government expects its creditors to "make the next move," so to speak.A "yes" vote would not have meant the terms being voted on would have been accepted, as that deal had already expired. However, it would have sent a signal to the Greek government, its creditors and the financial markets that the current regime's negotiating tactics and aversion to austerity measures no longer had popular support.Important things to understand:• There are many factors that drove the Greek debt to this unsustainable point, but three of the key factors of concern are the uncompetitiveness of the Greek economy (people would rather buy elsewhere), an unstable revenue base (Greece has difficulties collecting tax and a high degree of tax avoidance) and Greece's high amount of government spending (mainly on pensions).• Both the first and third issues are in part the product of Greece being part of the Euro at all - Greece cannot devalue its currency to make its goods cheaper and more attractive, and it also cannot simply print more of its currency to cover its spending needs.• ...but all three issues also have their roots in Greece's economic culture - uncompetitive practices that drive away international custom, a culture of "black" money in the lower and middle class and blatant tax avoidance in the upper class that starves the government of revenue, and a generous social security state that offered very early retirement to many Greeks.The current problem boils down to:• Austerity is bad - unbelievably toxic to an economy, especially one structured as the Greek economy is, with revenue streams still functionally starved out by an unchanged economic culture, reforms to promote competitiveness stagnant and facing public opposition, and with assets that won't sell while the whole economy is already compromised. Austerity prevents stimulus - spending to encourage the flow of cash to individuals and businesses, vital for those individuals to consume and those businesses to succeed. The only way for Greece to avoid austerity is with the help of its creditors, and that means another infusion of money.• Conversely, Greece is still terribly irresponsible in how it handles that economy - and it is no longer handling its own money. The creditors have a right to be concerned and to have expectations that their efforts to help not go to waste. Not only has the Tsipras government failed to offer any real reforms to improve the situation; both Tsipras and his finance minister have gone out of their way to publicly antagonize their creditors. The referendum could be seen, from a cynical standpoint, to have been an attempt to get an extension of the existing cashflow while Tsipras worked out another last-ditch approach - but that failed.Where do we go from here? Is Greece leaving the Euro?• Greece can no longer determine its own fate; at best, it can offer more appealing negotiating terms to its creditors, a move considered unlikely with the recent release of an IMF memo admitting that austerity will keep the economy suppressed and that Greece needs another major infusion of money to stay viable.• If the creditors refuse to give Greece and its banks more money, Greece will have no internal cashflow or means of sustaining a currency-based economy unless it prints its own money. Money so printed is not Euros - the Greek government has no legal right to create more Euros unilaterally - and so would be a second currency, one without any real value on the international markets. Gresham's Law tells us that "bad money" - money without value - drives out "good money" - money that people value. In this case, the Euros that Greece needs to collect to pay off its debts and engage in international trade would flow out of the country, as they have already been doing - nobody outside of Greece will accept a new currency in place of the Euro, as the guarantees of the Greek government have no value; meanwhile, nobody inside Greece will desire this new currency as its purchasing power will be suspect.

Greece is what happens when half the workforce retire in their 40s on full pensions and never paid taxes anyway.

Living like a rapper on a record deal when you've got no money and then wondering why your lazy country is ruined.

No, what you describe is an effect. The cause was bankers lending to a non viable entity....but that's what they can do when they carry no risk..... such is the wonder of fractional reserve banking.