The Greek financial situation has been known to fluctuate throughout history. There have been some low times caused by civil war, political instability and simple economic mismanagement; but there has also been periods of boom or growth. Most recently, the boom period experienced immediately after joining the EU. However, Greece has now found itself in one of the greatest financial crisis of this decade.
Upon its adoption of the Euro as a single currency in 2001, two years later than they were slated to, the Greek economy started to show signs of an economic boom as the GDP growth rate increased rapidly. This gave the appearance of growth and development in Greece, but in truth this apparent growth was as a result of cheap loans garnered from the European Union for adopting the Euro as a single currency. Hence when the world financial crisis of 2008 hit Greece, their economy could not withstand the impact and the growth façde started to crumble.
There are lessons that we can learned though from the Greek financial crisis, some of which are listed below.
1. Borrowing is not always the best option: it is imperative that all other options be evaluated before borrowing even if the loan-terms seem attractive.
2. Spend on what you can afford: overconsumption and living outside of one’s means will eventually lead to excessive debt, which will can be difficult to finance in the future.
3. Ensure sustainability in policy decisions rather than presenting a façde: Greece presented a seemingly growing economy as a result of excessive borrowing and even during their stages of collapse where they continued to try and present this growth picture by printing more money in an effort to keep their economy afloat. This however just leads to inflation and unemployment.
4. There is no one universal strategy that works for all circumstances: it is imperative to develop and utilize policies and strategies that works for you, rather than trying to adopt what someone else has used or is using.
5. Delay is dangerous: Greece has been borrowing money and now they have had issues in repaying that debt which has led to a lot of debt rescheduling and restructuring. Debt rescheduling comes at a cost which incurs even more debt causing the economy to sink even further. This could have been avoided if debt repayments were made on time
Overall, Greece’s financial situation is not one that is entirely exclusive to Greece, as many countries have gone through or are presently experiencing financial and economic issues. However, if we can learn from some of the mistakes made by Greece, we may be able to offset the negative impacts of a similar situation elsewhere.