Implosion in Greece? An analysis of the Greek debt crisis and its impacts on Europe and world markets

Vickstrom, Erik

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https://hdl.handle.net/2142/31203 Copy

Description

Title

Implosion in Greece? An analysis of the Greek debt crisis and its impacts on Europe and world markets

Author(s)

Vickstrom, Erik

Issue Date

2012-05-22T00:35:24Z

Director of Research (if dissertation) or Advisor (if thesis)

Kahn, Charles M.

Department of Study

Liberal Arts & Sciences

Discipline

European Union Studies

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.A.

Degree Level

Thesis

Keyword(s)

• Greek debt crisis
• euro debt crisis
• Eurozone
• euro
• Greek default
• Greece
• European Central Bank
• European Union
• European sovereign debt crisis
• Portugal, Italy, Ireland, Greece, and Spain (PIIGS)
• currency unions
• fiscal policy
• solutions to the Greek debt crisis
• future of the Eurozone
• European public debt

Abstract

This thesis seeks to address the impact of the Greek debt crisis on the stability of the euro and Eurozone, and the best solutions to the crisis. The chapters of this study explore currency unions in theory and practice, the operational components of the Eurozone, fiscal policy and its importance in Eurozone maintenance, and provide an overview of the events leading up to the Greek debt crisis. It analyzes strategies implemented so far to solve the crisis, looks at shifts in interest rates on Greek debt bonds, and performs a comparative analysis of previous currency unions that failed in an attempt to draw lessons from those examples. The study provides evidence that the current tools utilized to stabilize Greece are unsustainable over time, and if Germany does not provide adequate aid, Greece will further default on its debt, which will lead to significant implications for the Eurozone in the future. The global financial crisis of 2008 was extremely detrimental to the financial and economic well-being of countries, organizations, and individuals worldwide. Those reaping the benefits of an economic boom suddenly found the world in economic turmoil, with the downward spiral of financial markets forcing many to question the stability the longevity of the crisis. Since late 2009, conservative investors have expressed their fears that a sovereign debt crisis will develop within Europe, and put the future of the Eurozone at risk. While increases in sovereign debt load have been most pronounced in only a few Eurozone member nations, they are becoming increasingly problematic for the currency union as a whole. The European Union continues to call on Greece to implement austerity measures in order to reduce debt and cut spending. Past measures to counter the debt iii crisis have focused on providing the country with multi-billion euro bailout packages in exchange for implementing austerity. The majority of Greek citizens continue to publicly reject these measures, even with knowledge of the benefits some austerity measures and bailouts will have for Greece. As of this publication, Greece has partially defaulted. In March 2012, following a second EU/IMF bailout and austerity measures, private sector holders of Greek debt agreed to a debt-swap, with write off losses of $141.4 billion as a part of the debt exchange. While the effects have not been widely felt, further default will severely impact the future of the Eurozone.

Graduation Semester

2012-05

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Copyright 2012 Erik Richard Vickstrom

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