I couldn't resist myself from comparing the recent economic debacle in USA with a devastating earthquake - when the USA remained its epicenter the tremor could be felt through out the nations. Recently, the revelation of the distressing condition of Greece's economy only affirms my observation.
Greece's indebtedness of € 300 billion ($413.6 billion) is even bigger than the country's economy. Unrestrained spending, with no economic reforms and high level of corruption, has exposed the county to such a big economic crisis. Fiscal deficit of the country, which measures government's spending against its earning, is now standing at 12.7% of its GDP (gross domestic product).
Along with the rising fiscal deficit, public debt is also on a rise. It has risen to 121% of the GDP from 113% in 2009, only doubling the speed by which the country’s economy crashed.
Effect of Greece's crisis on the neighboring countries
As a result of this crisis, Greece's credit rating has tumbled with all the major rating agencies, reflecting the fast fading faith of the foreign investors from the solidity of the country’s economy.
However, Greece is not alone in suffering from its ongoing financial crisis. The entire European monetary system has been challenged as it failed to ensure that Greece follows the Eurozone rules of deficit management. As a result Euro has hit its lowest rate in five years.
This has also brought some other countries like Portugal, Spain and Republic of Ireland under scrutiny. Moreover, it would cause severe damage to the reputation of Euro if it has to accept monetary rescue from the International Monetary Fund (IMF).
The European Union, however, has shown solidarity on Greece's situation by calling it their internal affair, though it has also been made clear that they are not going to bail out Greece.
How Greece is reacting to the situation
The government of the country has promised to take control of the situation through austerity measures, following which a freeze has been imposed on pays of public sector employees. It would be redundant to say these measures were not welcomed by the people there. Anyway, the newly elected Prime Minister has promised to restore the economic condition of the country by 2012. So, we have to wait and watch (and pray for) its success.
It is time that we all start analyzing our stands so that we can prevent another round of economic crisis from happening. Too much greed and unregulated economic habits have only let us into this situation. Hopefully we would take a lesson from it to prevent such economic disasters in the future.