Effects of the Financial Crisis on Greece - Coursework Example

Effects of 2008 financial crisis on Greece The 2008 financial crisis affected many countries and disorientedeconomic, social, and political operations of almost every nation. A case study seeking to establish the effects of the 2008 financial crisis and its subsequent recession on Greece established that business operations reduced and the country’s government expenditure increased particularly due to stiff financial conditions. Since 1945, trade between countries has increased while tariffs and quotas charged on production, transportation, and other services reduced. With globalization, countries’ production, financial gains, and labour changed (Kolb, 2011:45). From 1979 onwards, all countries’ financial spectrum transformed with capital controls deregulating and witnessing of new financial elements such as derivatives. Economic activities intensified in Greece when the government resolved to fund Small and Medium Enterprises years before the economic crisis of 2008. Businesses boomed and social as well as political atmosphere transformed paving way for greater opportunities. However, this came to a halt when the entire planet submerged in an ocean of financial crisis in 2008 (Mceachern, 2012:63). This paper will seek to outline the way in which recent financial crisis of 2008 and subsequent recession has affected Greece. This will be realized by exploring Greece’s economic, political, and socioeconomic consequences as a case study country. A country case study provides an analysis of the country’s modern or contemporary developments. The 2008 financial crisis and its subsequent recession meant many things to almost every country especially the US, Greece, Ireland, Portugal, and Spain (Mceachern, 2012:26). However, the hardest hit nation was Greece where the country had to resolve to borrowing from international money lending institutions such as the IMF. Due to financial crisis, conditions in the financial markets changed where banks relaxed in interbank lending or purchase of any government debt otherwise known as bonds. Due to this situation, financial analysts and policy makers speculated presence of financial pressures within peripheral economies since such economies had accumulated huge deficits within their government spending (OECD Publishing, 2010:51). With increased deficits on Greece’s government spending, the country started experiencing increased debt levels. With this respect, it is agreeable that the recent financial crisis of 2008 and subsequent recession affected Greece by skyrocketing its government spending. This in turn increased Greece’s interest rates on the government debt (Kolb, 2011:60). Due to increased government spending and increased interests on government bonds, the country of Greece faced subsequent shifts in her socioeconomic situation. For one, both Greece could not face recession nor withstand the ongoing financial crisis (Kolb, 2011:81). As such, she needed a “massive bailout” which would only be in the form of lending particularly from the EU. Since the 2007, economic crises were severely devastating especially to countries with divergent political standings. Additionally, there were imminent cases where Greece and other peripheral economies faced deepest and slowest economic recovery. With reference to key indicators of a Greece’s growth indicators, the 2008 financial crisis and its subsequent recession exerted a heavy toll on her economic development, political sensation, and socioeconomic spectrum (Mceachern, 2012:77). Although the common capitalist economies are somehow out of this economic recession, it still appears that they are facing uncertainties and fragility. As a result, their economic development remained stagnant for quite a while until sometime in 2010 when the UK and US started showing signs of economic recovery (OECD Publishing, 2010:69). According to economic analysts, averting the immediate May 2010 meltdown was a sign that the crisis would re-emerge in the near future. As expected, it happened during the 2011 summer where analysts noticed that Greece was having a punitive situation and to pay her debts was hard therefore, chances of defaulting were high (Mceachern, 2012:90). Countries based at a better position to overcome or stand firm against this prolonged recession proposed to have Greece set better financial mechanisms to be able to sustain itself. According to this argument, the recent financial crisis of 2008 and subsequent recession affected Greece in many other ways, which included competitiveness, surplus on a country’s balance of payments, and deficits in periphery. Due to the 2008 financial crisis, which led to, prolonged recession, Greece witnessed intensified pressures in her labour markets (Mceachern, 2012:44). Greece had to adjust and meet the existing labour market demands where despite being a big territory with big firms, she had to improve her profitability with regard to the ongoing financial turmoil. For those countries facing stringent labour and financial crisis especially Greece, they could only improve their profitability through restructuring and moving particularly by merging with other different firms (Kolb, 2011:101). Through competitiveness, Greece and other countries in periphery faced subsequent pressure in their government spending. Using the Growth and Stability pact of 1997, countries that had difficulties moving out the 2008 financial crisis and its subsequent recession had to face the pressure of setting up mechanisms capable of disciplining their governments at times when they exceeded the planned government-spending limit (OECD Publishing, 2010:85). Additionally, intensified labour markets divided the Eurozone into two segments namely the core and the periphery. In the core side, Germany controlled the market whereas Portugal, Spain, and Greece appeared on the periphery side (Mceachern, 2012:105). A closer outlook into this scenario points out that Greece lagged behind this race of economic and labour competitiveness after failing to maintain stable wages and building up surplus on her country’s balance of payments. However, as time went by, Greece started coping up with the situation by holding down wages, increasing competitiveness, and improving her country’s surplus on the balance of payments. On the other side, loss of competitiveness meant that Greece had to struggle with more than just one way in order to boost her economy beyond her domestic demand levels (Organización Para La Cooperación Y Desarrollo Económicos, 2008:45). To do that, countries like Greece and Ireland strived towards increased investments particularly in the real estate as well as in the consumption. Government intervention Thus, pointing out that the boosting of Greece’s economic growth through intensified investments in the real estate and consumption is yet another way in which the country is doing to cope with the untamed 2008 financial crisis and its subsequent recession (Mceachern, 2012:62). Apart from affecting Greece’s government spending limits, the 2008 financial crisis followed by the prolonged recession affected the country via means that comprised of economic stagnation or rather deterioration, increased lending rates, and overstretched government spending (OECD Publishing, 2010:97). Greece’s socioeconomic development experienced static growth and stability in political deliberation signifying that the financial crisis had great impacts over the nations’ economies. Economically, Greece had her labour market projecting surmountable problems in maintaining better wage levels. Politically, scholars declare that the 2008 financial crisis and subsequent recession affected Greece through a number of ways. For instance, the political arena between the core countries such as Germany and France and the peripheral nations like Ireland and Greece sustained despicable sores where the former geared towards urging other countries to enter and support the facet of reduced barriers (Mceachern, 2012:88). In this context, dominant countries within the European market started politicizing the idea of introducing the European project, which was for the facade of digital and energy economy. The teaching of the Euro-zone predicament is the span that the European privileged will go to sustain the Euro and the European project, which is innermost to the economic and political system. According to policy makers, the question remains, will the Euro-zone break up – possible? Yet, it remains within the attention of the dominant nations in Europe as well as foreign capital, even still there may be a bit of shouting, to make compromises in order to protect the so-called the European project (Kolb, 2011:112). Hence, regarding the socioeconomic and political effects of the financial crisis of year 2008 and its subsequent recession, Greece faced many difficulties since her economy was mildly crawling. As of 2011, she continued to struggle economically and politically based on the idea that leaders forced their personal interests instead of country’s major interests (OECD Publishing, 2010:104). Effects of this situation maintains that recession will continue if the Greece and other peripheral countries do not find a way to structure their problems specifically those related to labour improvement and financial stability as well as economic growth (Mceachern, 2012:115). Profoundly, many commentators would accept or agree that, at the heart of Euro-zone, which is in this case is Germany, there are structural problems mirrored by those deficits seen in the peripheral economies. This shows that, if these external deficits were to fall, it will be necessary for surpluses to fall where these outcomes have obvious implications for the core country, Germany (Organización Para La Cooperación Y Desarrollo Económicos, 2008:58). Admittedly, no sign, which shows that countries like Greece need to adjust but they believe with Germany having its surpluses and reduced deficits within the peripheral economies, everything is possible (Mceachern, 2012:106). There will be positive effects on the economic and socioeconomic aspects of Greece whereas the subject of politics will remain debatable for quite a while. Nevertheless, one thing is for sure in which prospects maintain that there is a need to return Greece and the peripheral countries to their competitiveness or healthy statuses. In conclusion, the debates and themes revolving around the issues discussing politics, economy, and socioeconomic development of Greece and their effects need to shift for the better. Jus as outlined in this paper, Greece has the ability to underpin the entire ways in which she can cope and thereafter snap out of the recent financial crisis of 2008 and subsequent recession (Organización Para La Cooperación Y Desarrollo Económicos, 2008:83). Her foreign direct investments, movement of people and finance exchange has changed due to globalization and this makes Greece stand at a better position of eradicating the effects of the 2008 financial crisis and copping with its subsequent recession. As such, she can realize substantial benefits in her economic, social, and socioeconomic arms since movement of people and financial integration as well as exchange of goods has brought about the issue of transformed economic, social, and socioeconomic development. Bibliography Kolb, R. W. 2011. The financial crisis of our time. New York: Oxford University Press. Mceachern, W. A. 2012. Economics: a contemporary introduction. Mason, OH: South-Western Cengage Learning. Mceachern, W. A. 2012. Macroeconomics: a contemporary introduction. Mason, OH: South-Western Pub. OECD Publishing, P. 2010. OECD Economic Outlook, Volume 201. Washington: Organization for Economic Cooperation & Development. Organización Para La Cooperación Y Desarrollo Económicos, 2008. OECD economic surveys. United States. Paris: Organisation for Economic Co-operation and Development. Read More