Economic Status of Greek Economy - Research Paper Example

Economic Development Research Paper Introduction The European Union is an affiliation comprising several European states that deals with economy of its members. It is centered in Europe. It works through a system of inter-governmentally made decisions, made officially through negotiations. The affiliate states legislate through their expert bodies that include the ruling body, the central bank, the council, the commission court and the legislature, which European citizens choose after every 5 years. This happens through a system of legislations that abolish passport controls and enhance free movement of assets, services, inhabitants and merchandise. The union also enacts legislations governing the basic affairs and tenets of trade that apply to all the members. Greece joined the EU in 1981 as the 10th member state. Since then, the Greek administration endorsed its ticket to economic tumbledown due to key reforms pressed for by the EU (Genugten, Saskia and Tiersky 339). In this exposition, we shall study the economic status for the Greek economy. Postulated answers to the economic degradation and eventual downfall are given to explain the economic quandary and address it in detail. Within that particular epoch of profound Greek economic gradual breakdown, the other member countries of the European Union affiliation and other nations globally, experienced a considerable period of extrinsic shocks and hitches that affected the Greek economy, and generally, the other countries’ economies. However, the Greek economy turned out to be the most affected in terms of economic development due to its misadministration techniques that probably led to further weakening of the economy through perforation of loopholes where the quandaries found their way inside the treasury and led to high rates of debt prevalence that was coupled with ill governance. The European Union was the key moderating body and spelled out the basis of evaluation in terms of trade performance. The tradeoff leading to destabilization of the Greek economy was caused by several mismanagement and poor economy sustainability by the government treasury. These included poor macroeconomic development policies, downfall of finance creation rates in the general common, market, presence of structural and formational loopholes in the work markets and then quandary of joining the European Union, which further contributed to increase in the lame condition in Greek economy (OECD 44). Increased and tough competition in terms of trade incentives and regional domination due to limitation by the European Union stipulations resulted into the dragging of development in Greece, which fueled the government to prospect the acquisition of payable dues from other EU affiliates, resulting into eventual hit on the Greek economy and its eventual destabilization. Reasons for joining the European Union Because of the quandaries Greece faced in its early years, it found refuge in the EU, since it was an adept institution that could imminently stabilize their poor conditioned democratic political structure and its similarly affected institutions. Additionally, Greece sought to join the community in order to boost its negotiation powers and to aid in the inception of undisputed independence regionally within Europe and internationally in the world. This was in close relation and regard with the prior invasion and conquering of Cyprus by Italy, which came as a threat to its powers. In addition, Greece was aiming at reducing its previous reliance on the US for war reinforcement and backing. In this case, Greece sought to seek prestige in its power and ability to successfully legislate, win in wars alone and obtain regional, worldwide reverence and undisputed sovereignty globally. The Greek administration also conferred that by joining the EU community; it would strengthen, modernize and develop the Greek socio-economical status. Due to the imminent concentration by the European countries on European integration and modeling, Greece aimed at establishing its presence and influence in the entire impaction of the affiliation. On Greek application to joining the European Union, the European commission had the directive to express its opinion on Greek membership according to the Rome accord. Surprisingly enough, the European commission reacted quite positively to the application and thus gave the Greek administration and upper hand in its membership qualification, which allowed the Greeks to instill institutional reform exercise that would transform the institutional integration structure and inculcate economical reforms that would qualify it to join the European Union. Participation in the European community Greek participation in the community from the transitional epoch from its membership to date is divided into 3 major epochs that include; 1981-1985, 1985-1995 and the final period of 1996 to the present. The initial period comprises of imminent doubts on various critical aspects of the European integration system. Because of its inception, Greece submitted a memorandum to the community requesting support in creating local regime that would see Greece augmenting its economy restructure efforts towards economic stability. The integration conferred to the second request and assisted Greece financially to realize their dream. During this era, Greek was extremely reserved regarding the integration and the efforts and methodologies in the process of transforming their socio-economic and political status. The second era consisted of adoption of pro-integration systems with regard to the treaty with the European Integration on the upgradability of its socio-economic and political status. Joint strategy in new organizations and schools and suggestion for inculcation of the federal government played a big role in developing the Greek socio-economic and political status. However, the government exhibited inconsistencies in the economic sectors that saw the government shifting from the mean community-upgrading phase and the political arena too, which resulted into the Greek confirmation signing of the intermediate agreement and defusing of the quandary from the YFROM name (Petrakis 287). The third epoch characterized the Greek administration supporting of European integration in all departments with regard to the federal model. Socio-economic junction also took course in this era. This period was a landmark in the Integration since Greek occupied presidency for the 4th time and was directed towards stringent measures in the realization of the convergence criteria (Petrakis 287). Why the EU Harmed Greece’s Economy When Greece joined the European Union and incepted the process of socio-economic and political sovereignty, the government aimed at upgrading the lives of its citizens to meet the standards of a strong economy that begins from the microcosm of the entire country; the citizens. Due to this approach, various statistics espouse the reasons for the fall of the Greek economy based on expenditure on citizens and enormous debt incurrence that cripple the economy despite the country having economic independence prior to its inception to the EU. First one out of every 3 Greek citizens is employed by the government in its various institutions. This is regardless of their incredibility and ineptitude sine some of these people embezzle government funds and are not sacked. The government grants hefty salaries to these people and, thus, spends a lot of government and public funds on the salaries sustaining debts (Genugten, Saskia and Tiersky 342). Most of the Greek population comprises of the aged people above 65. The government pays huge pensions to the sold people regardless of the financial implication the practice has on the treasury of the government. Additionally, education in Greece is offered free to all students up to the advanced level. This confers an advantage as most of the brightest students originate from Greece but it also creates huge debts with countries, like Germany, to cater for the education that the citizens do not pay for. In addition to the appreciating and unpaid for expenditures on the citizens by the government, most of the Greek population underplays remittance of taxes to the treasury. They do this through dubious underhand methods and corruption to dodge from remitting taxes. Thus, most of the capital spent on the citizens is not ploughed back to the government treasury to pay the incurred debts and expenses by the government in developing the country. Minimal government supervision, on the grounds of democracy in corporation and freedom to the citizens, triggered by Greek membership to the European Union caused its economical decline (Petrakis 311). In an aim to attain sovereignty, the Greek administration provides numerous unpaid for luxuries and services without consideration to their negative implication on the economy. Offering free health services, pensions to over 65 years citizens and other substantial civic services rendered free to the citizens, qualifies Greece as an extremely extravagant socialist country. In addition to the poor or no gathering of taxes from the citizens and private quarter affiliations, it is evident that these corporations operate on public land without licenses and also operate unscrupulously with minimal government supervision. This ideology came into action because of the association of the Greek administration to the EU, to realize free trading by everyone. Due to this lame supervision and tax collection, the private quarter develops itself and keeps most of the funds derived unlawfully to them, crippling the government treasury. This triggers the government to seek financial loans and reinforcements from other countries to cater for its duty of catering for almost all its citizens needs. In order to reverse the grave situation, the government should inculcate a substantial tax paying rate to its citizens whom it does not, leading to debt accretion. With the realization of the consequences of lowly priced domestic merchandise and high wages paid to the workers negatively impact on the economy, major industries, corporations and domestic producers have switched to a directive that substantially augments the price of commodities manufactured in the country relative to the ever augmenting wages of the workers. This practice results to an alternative in augmented importation substitution rather than intrinsic manufacture, which consequentially resulted into less competitiveness of the domestic producers relative to the foreign producers and an immense trade deficit. This resulted into ineptitude and laming of the product market with a poor pricing strategy. Because of the imminent quandary on the trade deficit, the Greek administration spends consummate amounts of its financial outlay in importation, which cripples the economic and trade sector, resulting into gradual decline in the economy of Greece (Genugten, Saskia and Tiersky 339). With the transformation of the Greek currency into the Euros by signing in with the EU, Greek obtained an advantage of procuring loans and borrowing from other countries who are members, since the borrowing rates decreased by approximately 15%. The Greek administration thus sought to borrow ore moneys at low rates and inculcated the funds in the payment of its highly paid citizens, upholding of the substantial wage growth offer free public services, offer free education, offer pensions to the aged population at the expense of paying down its huge and consummate debts. Still in the procurement of a better name as a powerful and influential member o]f the EU, Greece hosted the Olympics in 2004 that cost 4.5 billion Euros. In addition to the huge expenditure spree, the administration lost colossal amounts of funds income to tax evasion by the citizens and the private sector too. This results into the debt meter hitting approximately 300 billion Euros, hence disintegration of the economy. In an effort to get the consummate Greek financial debt crises settled, the EU is pressing on the Greek administration to instill stringent austerity measures that include cutting down on wages of the working populations, substantial depreciation of the pensions offered, tax appreciations and loss of benefits by the populations is leading the country in an abyss of a financial and economical down fall unless the country is pardoned for the huge debt it owes to the EU member states. Because of the EU pressuring the Greek administration to pay up to the stringent austerity measures, the unemployment rate is hiking at colossal rates of approximate 16% and numerous businesses and affiliations and approximately 100,000 breakdowns (Plaskovitis 8). Since the workforce of the country and the businesses of the Greeks are the primary source of the government finance obtained from taxes, the economy is declining and breaking down at a hurtling pace. Additionally the rate of unemployment declination leads to most of the citizens living beneath the paucity line and being unproductive. Many other member European states who are associates of the European Union also are facing profound debt catastrophes related to the one in Greece. Since they need bailouts like Greece, there is likely a consummate depravity in the entire European economic status. These countries include Ireland, Portugal, Italy, Belgium and France (Genugten, Saskia and Tiersky 343). Such a huge storm on the economies of the Entire Europe, due to membership into the EU, has resulted into great unrest and demonstrations by the inhabitants of the affected nations, especially Greece, who profoundly affects negatively the productivity and subsequent successful trade in order to bail them out of the debt saga. Having sought a position for membership with the European Union, Greek mapped the way towards steadiness and expansion by applying regulators and strategic changes into action. They altered their currency from drachma to the coveted Euro. This changeover subjected them to towering rates of borrowing that led the economy into a pitfall. The European Union also instilled a pact with Greece to realize steadiness and expansion within a given time. Having concentrated excessively on the government spending that economic stabilization, the government entered into a major tradeoff that sent the economy down the drain from 2001 to 2006. Greece had violated the pact and the EU was back to pressure on the Greek government. Thus, the government sought to borrow financial outlay from the EU affiliate states to upgrade its status. However, the utilization of the opportunity was detriment by its incurrence of an immense debt, which had to be paid. Income decreased and the rates of inflation, public debt incurrence and unemployment augmented. Underperformance and poor recording of statistics relation the taxing in Greece further contributed to the decadent state of the economy. Due to the drawback, the EU pressured on the chief credit rating affiliations and also initiated major austerity reforms that resulted into a financial crisis. The austerity measures included reduction in government expenditure, cutting down on the public quarter, depreciation of tax evasion and reformation of the public medical care pension structures which were not welcome to the general public and the influential labor unions. With such unrest, the government treasury toppled over maximally. The European Union , in a effort to assist Greece bail out from its immense debts, congregated with other affiliate states in order to ease the debt crisis and craft financial safety in Greece, by combination of bilateral loans from the respective member states. However, it is evident that the borrowing rates were much greater than the Greek administration could afford to handle, though they were lower relative to the previous rates of debt payment Greece faced before. The skeptical nature of the markets has seen investors elevating the Greek bonds highly above those of the developing countries, which is notably implicating inferiority and helplessness of the Greek administration to bail itself out of its earned debt crisis. The coveted issue of raising VAT by 5% is meant to worsen the economic instability situation that Greek experiences (OECD 44). This is a lame measure as long as competence and growth is concerned. This is because it has led to increase in the domestic rate of inflation, thereby introducing the competitiveness quandary, since the economy is already degraded and cannot devalue easily. The increase in VAT increases the producer prices augments the consumer price index and eventually projects the export quarter producer costs. With an insurgence in the taxation, decrease in employment, the government faces a huge deficit in tax as more people are displaced from employment, more enterprises close down and foreign investors lose focus. This extends further to augment the trade deficits, which incur more debts by the Greek administration. Because of non compliance with the standards of the EU, Greece has collapsed economically gradually over the years. Summary and Conclusion The World Bank, by 2010, pronounced Greece economy, as the thirty-second greatest economy worldwide by the normal GDP and the thirty-seventh largest in terms of the normal PPP. It is a developed country and is thus an adept affiliate of the European Union. Being perceived as one among the vastly globalized economies and a huge economy, Greece is a major contributor to the economy of the world (Plaskovitis 8). However, having faced a major downfall in is economic status through deliberate incurrence of debts and embezzlement of funds in providing high wages to its populations and extortionate pension schemes, the Greek economy, no matter its high profile as one of the greatest world economies has inevitably declined and is in a derogatory status in terms of its depreciating economy affected by the immense international debts it has to cater for. Finally, for the Greek administration to rise up and persist economically, the government ought to congregate together with the citizens, plan the way forward in rectification of the faults, and negotiate on the most suitable methods of doing so before the grave situation goes out of control and becomes a worldwide concern. To shield and protect Greece from total economic crash down, the government, in conjunction with other trade and economic genius associations without excluding the c citizens should congregate and join hands together in the profound fight against total economic destabilizing in Greece. The government ought to devise credible and worthy methods to culminate efforts and resources, through major trade and economic adjustments in the country, towards the complete realization of the solution to the economic breakdown quandary at hand (Petrakis 287). The government ought to stabilize its economy by enhancing various major areas that are trivial to economic growth such as the rebuffing of the macroeconomic development. The government ought to consider dismembering from the European since it is the major cause for its current vile economic status. Thus, the government should revert to its own currency system, the drachma to, fully, control their economy and growth rate. The government also, ought to congregate and aim at res solving the debt crisis issue that it is facing (Plaskovitis 8). There can be talks with the debtors to trim the arrears and allow Greece to pay their remittance in installments than paying the huge amounts at once or rather seeking for bailouts from the other states and creating a debt chain. Numerous issues regarding mismanagement of government funds should be put into scrutiny and eliminated. This includes the extortionate pensions, tax evasion and high salaries (Petrakis 287). Works Cited Genugten, Saskia, Jones, Erik and Tiersky. Ronald. Europe Today: A Twenty-first Century Introduction. Plymouth: Rowman & Littlefield, 2011. Print. Petrakis, Panagiotis. The Greek Economy and the Crisis: Challenges and Responses Athens: Springer, 2011. Print. Plaskovitis, Ilias et al. Regional development in Greece. Athens: Springer, 2002. Print. Organization for Economic Co-Operation and Development. OECD Economic Surveys: Greece. Paris: OECD Publishers, 2011. Print. Read More