- Posted October 5, 2011 by
Greece's Economic Crisis
What is happening with the economic crisis in Greece?
Greece was spending money it doesn't have. Now they are 400 billion dollars in debt and have to pay part of it off this month. The public spending soared and the public sector wages were doubled.
What caused these problems?
In the past decade, Greece borrowed heavily and went on a spending spree. Greece’s budget deficit was 13.6% last year. This is one of the highest in Europe and 4 times the Eurozone rules. They borrowed money to raise the pay for public workers.
What is Greece doing about it?
They made a plan to cut budget deficit to less than 3% by 2012. They plan on making spending cuts and tax increases. They want to freeze public sector workers pay, make cuts in civil servants benefits, raise sales tax, raise retirement age, and reduce pensions.
What impact will this have on the US?
Everyone in the eurozone and anyone who trades with the Eurozone is affected because of the impact on common European currency. The most immediate impact is on the 15 other eurozone economies who agreed to help out Greece. Taxpayers of these countries will share a part of Greece’s burden. The major way this will affect us is if Greece’s economic crisis isn't contained. This will hurt us in exports. The US dollar would be strengthened so exports would be more expensive. In Greece, the interest rates would soar and the value of the Euro would fall. Europeans wouldn't be able to buy as many products from the US.