Greek Credit Crisis Essay

1919 words - 8 pages

Broken Promises:
A Classic Greek Tragedy

Presented by “Prestige International”
Ana Maria, Atty, Patrick and Tom
Professor Dr. Bonnie Woodson
T-TH 11:10am
“Within hours of taking office government officials said they would stop the planned sale of the state’s majority stake in Greece’s largest port and dominant utility. They also pledged to rehire thousands of public-sector workers and reopen the country’s state broadcaster, which has been shut down by previous government.” - Bouras & Karnitschnig (Wall Street Journal, 2015)

A beautiful European country on the Mediterranean, Greece was living on borrowed time. Since gaining independence from the Ottoman Empire in 1832 Greece has ...view middle of the document...

This has effectively left Greece in a state of financial turmoil that threatens to tank its economy, since they were relying on ECB to bail them out. (Steinhauser and Denrinou). In order to propose a correction to this disparity an examination must be made of how Greece and its leaders reached this point. It is important to consider Greece’s domestic leadership as solutions are proposed, while analyzing Greece’s role as a member of the European Union (EU) and considering how the EU leaders are using their power to save Greece and the larger European economy.
During the 19th century with the government making minimal legislation and the market had the freedom to develop as the workers and companies willed it. This is an example of the “Situational Leadership II” Greece had a leader that had high supportive but also had a low directive style. Greece was more concerned about helping their people then trying to reach their economic goals, which eventually led the country into bankruptcy. During this time, the many wars of the early 19th century saw an influx of refugees from Asia Minor flooding into Greece. According to historian Charles Issawi, prior to 1914 Greece held 45% of the Ottoman Empire’s capital, as well as providing refuge for many wealthy displaced Turks. It is reasonable to presume that with such a large influx of refugees, their money and skills, Greece’s industry prior to the completion of WWI may have been to largely dependent on the inflow of money and talent from abroad (Issawi).
The two time dichotomization of the Greek Dracma and an unpaid loan to the general population after WWII lead to deflation and a depression in 1932. At this time the leaders of Greece had the option of minimizing the government or continuing down the path of fiscal irresponsibility. Unfortunately Greece’s leadership gave more focus towards building short term relationships with their citizens to gain popularity domestically, rather than addressing its debt woes and the possible long term economic consequences. This is a clear cut case of a “country club” style of leadership. This style refers to leadership that has a high concern for the development and maintenance of interpersonal relationship rather than completing the necessary task (Northouse).
In the 1980’s the second oil shock after the Iranian revolution hurt Greece’s economy badly. Poor fiscal practices hurt Greece’s standing in the euro coalition (E.C.) as well as contributing to drastic increases in inflation which rose from 19% in the early 80’s to 25% by 1985. What about the acronym P.I.G.S.? Since 2008 we have been hearing about the bad economies of Portugal, Italy, Greece and Spain. The term is in reference to the southern economies of the EU. The economies of Portugal, Greece and Spain can be co-categorized by their common proclivities towards unsafely high national budgetary deficits in relations to each country's GDP and rising debt levels. Greece’s Debt to GDP deficit is 120%, while...

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