Greece and its Economy

In recent news, the economy of Greece has been in the spotlight due to the Debt Crisis of 2010. In an article by Brian Milner, he states that:

The problem started long before the current situation. Greece has been living beyond its means for a long, long time. In fact, from the time it joined the euro zone, its deficits have been higher than 7 per cent, which is more than double what they're supposed to be to belong to the euro. Greece has structural problems within its economy that it never really resolved. It's a very small economy with a very large public sector which accounts for about 40 per cent of its GDP. It was deficit spending all along and the 2004 Olympics made things even worse. 

Read the full article here

The Olympics made things worst? Well, during 2003 and 2007, the economy did grow by almost 4% partly because of infrastructural spending related to the 2004 Olympic games.


One may ask how things got this bad. Let's take it back to 2002, when they adopted the euro as its currency. The country began living beyond its means and saw an increase in consumer spending, ultimately when the country started spending more than it had. They did however, see a boost in economic growth. 


From 1997-2007, GDP growth in Greece averaged at 4% which was almost twice the European Union average. The country saw growth drop to 2.9% in 2008, and in the following year was struck by recession and saw growth drop again to 2.5%. That didn't stop this country. With the failure to address the growing budget deficit from 2001-2006, Greece violated the EU's Growth and Stability Pact that stated the budget deficit criteria be no more than 3% of GDP. It achieved the criteria from 2007-2008, but in 2009 was hit again and exceeded it by 12.7%.


The government is still under intense pressure by the EU and international lenders implement programs that include cutting government spending (13.6% of GDP in 2009), controlling public debt (115.1% of GDP in 2009), and changing the labor and pension systems. In 2009, the EU placed Greece under the Excessive Deficit Procedure, asking Greece to bring its deficit back to 3% by 2012.

Comparison of GDP of Greece compared to Euro zone is displayed in the graph
http://en.wikipedia.org/wiki/File:GreeceEconomyGDPEnglish.png

Overall, Greece is the 27th largest economy in the world (by nominal GDP), 33rd largest (by purchasing power parity), and 25th highest by GDP per capita. What exactly makes up this country's GDP? 40% of it comes from the public sector, 15% from tourism, and 3.3% comes from being a major beneficiary of EU aid.

Sources used: http://en.wikipedia.org/wiki/Economy_of_Greece

http://www.theodora.com/wfbcurrent/greece/greece_economy.html

http://www.traveldocs.com/gr/economy.htm

http://www.theglobeandmail.com/report-on-business/brian-milner-explains-the-greek-debt-crisis/article1554488/