The Study Of Causes Of Greek Sovereign Debt Crisis

By the end of2009the outbreak of the Greek sovereign debt crisis hit the global economy again when the momentum of the global financial crisis triggered by the American subprime mortgage crisis reduced slightly. To save troubled Greece, a "troika" comprised of European Union, European Central Bank and International Monetary Fund launched two large-scale relief operations. Although these two large-scale relief operations has avoided occurrence of default of Greek sovereign debt and bankruptcy of the nation so far, the large-scale austerity program for Greece makes Greek economy continued to deteriorate. When the year of2013came, Greece began to experience its sixth consecutive year of economic recession, high unemployment rate, outbreak of public demonstrations and unstable society.For the study of the causes of the debt crisis, this paper is divided into three aspects specifically addressed. Combined with empirical and normative analysis, the author thinks that the lack of sufficient power for Greek economic growth is the root cause of the sovereign debt crisis, and demonstrates the intimate relationship between economic growth and a country’s debt burden by the mathematical model in this section. The reasons of lacking sufficient power for Greek economic growth lies in four aspects, namely excessive dependence on consumer, imperfect industrial structure, the government under the heavy pressure on social security and low labor productivity. Due to the sovereign debt crisis occurring in the world’s highest degree of regional economic integration organization-the Euro Area, this paper analyzes the impact of the economic policy coordination mechanism of the Euro Area on the sovereign debt crisis from a macro perspective, and say that flaws in the economic policy coordination of the Euro Area is the fundamental system reasons for the formation of the sovereign debt crisis. Specifically, the expanded analysis combined with mathematical model come to a conclusion that the most serious consequence of the lack of independent monetary policy in the member states of Euro Area is that member states can’t realize the goal of national debt monetization. At the same time, Greece can’t devalue its currency due to the loss of independent monetary policy. In addition, the financing capacity of the member states has been blurred and increasingly depended on Germany’s economic performance after the single currency in the Euro Area. Of course, another defect in the Euro Area’s economic policy coordination mechanism is the lack of fiscal discipline for each member states, and this kind of missing is fatal to the Euro Area’s economic stability. After micro and macro analysis of the sovereign debt crisis, this paper deepened the analysis of the crisis innovatively from the aspects of political and social factors including the governance of the Greek government, the diplomatic environment of Greece and the social and cultural atmosphere before the crisis.Combined with the mathematical model research, the author thinks that the Greek short-term debt burden will increase, but with its economic recovery the Greek medium-term debt burden will decline and is manageable. Due to the current debt situation, economic and academic circles have a view that Greece will leave the Euro Area. This paper reject the idea that Greece should leave the Euro Area and believe that Greece will remain in the Euro Area according to the related analysis. To solve the debt crisis, this article made relevant policy change prediction from the aspects of Greece, EU and Euro Area respectively. This paper argues that Greece will make greater efforts to raise the level of governance, update industrial structure and improve the diplomatic environment. From a macro point of view, the Euro Area will strengthen the fiscal discipline of member states.In this section, this article argues the possibility of the fiscal integration in the Euro Area, and concludes that despite it is not the best time now for fiscal integration in the Euro Area, the Euro Area’s fiscal integration is the only way to avoid such debt crisis in the future. At the same time, the European Central Bank under the current crisis situation will implement a more flexible currency policy, which includes ample liquidity support and a weak euro policy, however, the Keynesian monetary expansion policy in essence depends on the attitude of the Germany. German government needs to make concessions to the implementation of this policy and to tolerate higher moderate inflation. The research of the Greek sovereign debt crisis can deepen the understanding of regional economic integration organizations’especially the economic and monetary union’s policy coordination mechanism and provide beneficial reference for the economic development of China. The debt crisis rooted in the reality that the size of the debt is beyond the actual economic development, and the current highlighted debt problems of some local government in China are also derived from this cause. Therefore, this article put forward relevant policy recommendations for our local government’s debt problems through the study of Greek sovereign debt crisis. In the meantime, Chinese enterprises should find and grasp the opportunity behind the current crisis although the Greek sovereign debt crisis brings the experience and lessons for China. Through the study of the case of China Ocean Shipping (Group) Company’s investments in the Greek port, this paper argues that related Chinese enterprises shall seize the current opportunities in the massive privatization program in Greece under the condition of avoiding related risks and fully practice the strategy of "going out".