Greece was living beyond its means even before it joined the euro. After it adopted the single currency, public spending soared for example public sector wages rose 50% between 1999 and 2007 (Greekcrisis.net) much faster than in other euro countries. While the money flowed out of the government repository, its income was hit by widespread tax evasion. So, after years of overspending, the difference between spending and income (budget deficit) spiraled out of control. When the GFC hit, Greece was not prepared to cope. Debt levels reached and the country was no longer able to repay its debts so it asked for assistance from the EU, who provided 110bn euros ($140bm) so that Greece Government could pay its creditors. This wasn’t enough so a second bailout was provided and it went on and on….
And the Story of Greece economy is……
It is a slow day in a little Greek Village. Times are tough, everybody is in debt
, and the everybody lives on credit.
On this particular day a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one, to spend the night.
The owner gives him some keys and as the soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.
The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.
The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.
The guy at the Farmers Co-Op takes the €100 and runs to pay his drinks bill at the tavern.
The Tavern owner slips the money along to the local “prostituée” (excuse the French, let’s keep it within the same Continent shall we) drinking at the bar, who has also been facing hard times and had to offer him “services” on credit.
The “prostituée” then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.
The hotel proprietor then places the €100 note back on the counter so the rich traveler will not suspect anything. At that moment the traveler come down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.
No one produced anything. No one earned anything. However, the whole village is now out of debt and looking to the future with a lot more optimism.
Source: I think John Lee’s cleanskins 🙂