In 2001, Greece adopted the European Union's currency, the Euro. Despite being a member of the union since 1981, it hadn't entered the eurozone since its budget deficit was too high. Its debt-to-GDP rose to 97%, much higher than the maximum 60% standard to adopt the Euro currency.
In 2004, Greece publicly announced that it had lied to get around the criteria but wasn't sanctioned or criticised as :
Major European powers like Germany and France were also spending above the limit at the time and didn't want to seem hypocritical
The European Union wanted to strengthen and consolidate the euro so other major nations like the UK would adopt the euro.
What happened next ?
The Great Recession of 2008 lead to a worldwide crisis, and its impact on Greece was major due to the fall in tourism and shipping simultaneously. Additionally, it is later found out that Greece's budget deficit was not just 6.7%, rather more than double that at 15.4%. The 'Troika' within the International Monetary Fund (IMF), provided 240 billion dollars accumulatively for Greece to stabilise and pay off its interest on the debt it already possessed. However in order to raise more capital, Greece had to start taking much more stern measures like increasing VAT taxes, imposing measures to counter tax evasion. It reduced wages, lowered retirement incentives, pension, etc. These are known as Austerity measures which the EU and investors were forcing the government to impose.
In 2011, European Union nations provided a further 190 Billion Euros. The year afterwards, in 2012, investors exchanged their debt worth an accumulative 77 billion dollars for debt worth 75% less.
By 2014, the economy grew by 0.7%, but when the Syriza party was elected in 2015 as the ruling party, mayhem once again broke out. They held a referendum asking Greece wether they wanted the austerity measures to be dissolved. The referendum passed, but with investors and the IMF pressurising Greece, they implemented the measures anyway. By the end of the year, Greece's 4 largest banks raised capital in excess of 14 Billion Euros. It was predicted that Greece may in fact return to growth by 2016.
In 2016, the EU gave another 7.5 billion which was planned to be used to pay interest on its debt. Greece promised to privatise more companies, sell off nonperforming loans and continue with all its austerity measures. In 2017, the EU issued its final loan of 86 billion Euros to Greece. This broadened the tax base and also meant that Tsipiras further cut pensions and increased taxes. On the 20th of August, 2018, the bailout program ended. The enforced measures meant that unions couldn't strike to harm the nation, it allowed for better functioning and strengthening of banks. Until the outstanding debt, mostly to German investors is paid off, Greece has been forced to implement these rules and regulations as it seeks to bounce back from the recession of 2008 and stabilise itself.
Conclusion
Despite avoiding default, the Greek Economy is still not fixed. It has a growing black economy worth nearly 20% of the GDP. Tax evasions have lowered however the growth of the black economy has meant that lower taxes are paid to the government. The unemployment rate has continued to suffer and barely recovered from the real estate crisis of 2008 in the United States of America.
Till Next Time,
~Nehal Singhal