Category Archives: Policy Voice Contributors

The recent instability in Greece caused concern in economies worldwide, including here in the United States. In order to fully understand the dynamics of this relationship, one must first look at the problem as a whole and the means by which Greek officials sought to solve it. Austerity measures, including mild wage cuts, were put in place, but proved insufficient. After putting all of this into perspective, one can start to see the broader implications in regards to the American economy.
The Greek economic problem has several root causes. One of these is heavy government spending due to raised government wages and social programs, such as pensions and health care. Tax evasion by Greek citizens amplified the problem; the Greek government loses nearly $30 billion every year, which is approximately 15% of the country’s GDP. These two factors drove Greece to exceed the 3% GDP deficit ceiling established by the European bank, to a rate of 15.4% GDP. This, in conjunction with the fact that tourism, Greece’s biggest industry which accounts for 15% of GDP, was adversely affected by the decline in the world economy, leading to a loss of confidence in the Greece’s ability to meet its debt obligations. Continue reading →