Introduction
Current problem: Greece’s economy was in the brick of falling and other nations had to look for a way to stabilize their economy.
Thesis statement: During an economic meltdown, there is no winner or loser since it affects everyone in one way or another. Coming together to save a failing economy is the only way out of a financial meltdown
Background
Greece was heavy in debt and could not borrow more to settle its creditors. The failing economy spiked major concern to its investors (Mattich, Could Greek Deal Be Bad For Eurozone Growth? par 1).
Major Point 1: Despite being a small economy, the choice to default by Greece would harm the global markets, especially those that invested in the country (Mattich, While Greece Steals Headlines, Don't Miss the Memo on Germany par 6).
Conclusion
Restatement of Thesis: The financial meltdown of a country, despite its size, will affect the world market. Hence, during an economic meltdown, there is no winner or loser since it affects everyone in one way or another. Coming together to save a failing economy is the only way out of a financial meltdown
The financial year of 2015 ended on a good note after going through a financial breakdown because of Greece. In mid-2015, Greece accumulated more debt that it punctured their economy, implying there was little its Central Bank could do to save the crisis. However, the situation was mutual to most countries that had agreements with the country. Hence, if it were to fall, other countries would follow eventually. Investors pulled off from the country due to the projections of a financial meltdown and most stocks dropped within weeks. In such instances, there are winners and losers, but it was quite a hard tumble for the losers. The paper looks into the Greece financial meltdown, the unanimous decision to save the country and lessons to learn from it.
The Greece situation affected the Eurozone, despite the fall in oil prices. The good news of the price drop of oil meant that Europe will save on extra energy costs (Mattich, Could Greek Deal Be Bad For Eurozone Growth? par 3). At this point, Greece was safe, but not for long. Most industrialized countries spend a lot of money on energy sources since it is the economy’s core. Hence, most of their imports revolved around buying crude or refined oil from the Middle East, then distribute it among its industries. However, the drop in price meant most countries would invest more into buying oil and keep it for themselves for the rainy days. The global demand rose higher than expected, spanning fear across Greece (Mattich, Could Greek Deal Be Bad For Eurozone Growth? par 4). However, Greece was not in a position to borrow more money since it surpassed their credit limit. On the other hand, countries such as France and Germany could not find more funds to buy the oil because of the pending debt not collected from Greece. There was fear that Greece would default its debts and render them broke for a few years or until the time they break even.
The situation brought about mixed reactions to the oil demand in the Eurozone since most countries were afraid of seeking more loans from their local banks because they were not sure about Greece. The Eurozone is a substantial importer of oil and affects the market in a particular way (Mattich, Could Greek Deal Be Bad For Eurozone Growth? par 7). The rising oil prices would turn out to be tax levies charged to people and bring down the consumption of fuel. Regardless of the situation, the German exporters might not feel a pinch in the whole situation since the demand by manufacturers would rise in oil producing regions. The oil crisis turned out to be a big hit to the region since the countries had to weigh their options on whether to buy at the time or wait for Greece to recover.
Central Banks across the world were at bay watching the development of Greece. With the rumors of a default by the country, the Central Banks did not see this as an issue, but rather its effect on the investors (Mattich, Why Central Banks Worry About Greece par 2). Investors help in building a nation by placing their money on development projects and financial institutions. A failing economy does not interest investors, as observed in the mass exit of Greece. Other countries knew if Greece defaulted, the investors would think twice when investing in a falling economy. The European Central Bank, International Monetary Fund and other European governments held the Greek debt (Mattich, Why Central Banks Worry About Greece par 5). If Greece defaulted, most of the investors in the Eurozone would draw out their investment because of the fear that the other countries will follow Greece. Despite Greece having a small economy, its effect would be great, as it would draw out the future for investors. The Central Banks across the globe had to make unanimous contributions to support the country in a bid to win investor’s hearts and money. Apart from that, there was hope of a better future for the country and the Eurozone.
In the following months after the financial meltdown in Greece, creditors brought in money to save the country and avoid a similar situation in Italy and Spain (Mattich, Will A Deal Leave Greece in Ruins? par 2). The two institutions would look for a way of settling their debts and avoid the country’s option to default its debts. Another issue was its maturing loans since it continued to hurt the economy. The more they borrowed, the higher their interest rates rose. Hence, their deal was more of a variation between the existing austerity terms and new terms that will benefit both parties. The Greek government was to increase its taxes and spend less in its financial year for them to break even in all situations. It was a huge task ahead for the country and its financial planners in finding a solution that will be a win-win situation for the parties involved in it.
With the hope of a better future for the Greek government, the task was on their hands as to how they would quickly implement the changes and revive its economy. Spain was in similar situations a few years ago, but it managed to recover its economy (Mattich, Will A Deal Leave Greece in Ruins? par 4). It was quite a hard task for them, as they had to make drastic measures to its economy, rendering people jobless for a while. However, its turnaround was successful, and they managed to stabilize its economy. Italy is slowly rising, despite the budget deficit. It averaged 0.7 percent GDP growth over three years, indicating a slow but sure rise in investor confidence in the country.
The Greece situation had a toll on Germany as its inflation was steadily rising, though their economic sentiment was beginning to crumble with every passing day (Mattich, While Greece Steals Headlines, Don't Miss the Memo on Germany par 2). Germany invested heavily in reviving Greece, and the toll would be heavy if it were to default. Hence, the country rallied the Eurozone and other major countries to help save the Greece economy. It will be a major hit for the international market if it loses both Greece and Germany. It would imply that other countries would follow Germany leading to an international crisis. In the end, Greece had enough credit to save its failing economy and the world market stabilized, though it was quite close to its financial brick. The lesson learned in the Greece economic tumble is that every country is important regardless of its market share. The fall of a minor country affects greatly the others, especially those that invested heavily in it.
Works Cited
Mattich, Alen. Could Greek Deal Be Bad For Eurozone Growth? 26 June 2015. Web. 15 April 2016. <http://blogs.wsj.com/moneybeat/2015/06/26/could-greek-deal-be-bad-for-eurozone-growth/>
—. While Greece Steals Headlines, Don't Miss the Memo on Germany. 17 June 2015. Web. 15 April 2016. <http://blogs.wsj.com/moneybeat/2015/06/17/while-greece-steals-headlines-dont-miss-the-memo-on-germany/>
—. Why Central Banks Worry About Greece. 29 June 2015. Web. 15 April 216. <http://blogs.wsj.com/moneybeat/2015/06/29/why-central-banks-worry-about-greece/>
—. Will A Deal Leave Greece in Ruins? 25 June 2015. Web. 15 April 2016. <http://blogs.wsj.com/moneybeat/2015/06/25/will-a-deal-leave-greece-in-ruins/>
