An Analysis Of The Evolution And Causes Of Greek Debt Crisis

At the end of 2009, the international rating agencies downgraded Greece’s sovereign debt rating, causing panic intensified. Due to the contagion mechanism,Greece’s sovereign debt crisis quickly spread to the entire euro zone. In August 2015,the German Parliament approved a total amount of 86 billion euro aid loans provided by the European Commission and the International Monetary Fund. This is the third round of assistance from international financial institutions since the Greek sovereign debt crisis in 2009. After six years, the negative impact of the debt crisis in Greece has not yet subsided.This paper analyzes the evolution process of the Greek debt crisis and comes to the conclusion that the reasons why the first two rounds of debt loans didn’t function well are as followings: IMF and European Commission’s aid decision was delayed,the demands for the Greek fiscal reform were too harsh, and the structural reforms leading by Greek government after the crisis contained the economic recovery.Meanwhile, through the analysis of the Greek government debt rate and the government deficit ratio, it reached the conclusion that the debt in Greece is not sustainable. The occurrence of Greek debt crisis is inevitable. Internal causes of the crisis include lack of competitiveness of Greek products, high welfare pension pressure, low level of government governance and Greek cultural influence. External causes of the crisis include the duality of the euro area monetary policy and fiscal policy, lack of supervision of the euro zone members, the influence of the international financial crisis and the promotion of international rating agencies.Through the above analysis, this paper makes inference that only if Greece adhere to the tightening of fiscal policy, change welfare model and implement the economic structure reform will it make significant economic growth. The Eurozone should strengthen supervision and internal mechanism, which is the key to solve debt problem.Finally, doing research on the Greek debt crisis is of great significance to China.We should pay attention to the problem of local government debt as well as strengthenfinancial supervision, promote industrial innovation and upgrade to enhance the competitiveness of products. Thus we can prevent the debt crisis from happening.