I’ll be candid. I’m sure that you’re not incredibly interested in a mildly dense recounting of Europe’s current economic state. But I promise that it’s intriguing and worth knowing about, and I have a point to make about it. Plus, if it somehow comes up in conversation, you’ll sound like a genius. Oh, and you’ll get to learn the fun word “grexit” — a combination of the words Greek and exit. I like to imagine it with a hashtag in front of it. #Grexit.
I knew that #Grexit would win you over.
Many European countries are part of the Eurozone — a group of countries that all use the euro as a form of currency. In many circumstances, this unified currency has a variety of advantages, but currently Greece’s economy is on the verge of bankruptcy. Since Greece is part of the eurozone, this could spell disaster for a variety of countries. It could even impact the United States.
The trouble began years ago, when Greece began spending far more than it could afford. Both the government and individuals continually overspent, and while this would appear to be a problem that other countries would quickly realize, Greece was able to provide fraudulent information to mask its deficits.
They could have continued hiding this information if it weren’t for a financial crisis.
From 2007 to 2009 a financial crisis sent ripples throughout the national economy. The downturn unintentionally spotlighted the country’s immense debts and deficits that defied Eurozone regulations. This quickly led to panic at the fear of Greece going bankrupt, causing harm to both the country and other European countries.
The downturn created a need for bailout money, which would attempt to protect Greece from bankruptcy. Eurozone countries approved 110 and 130 billion euros worth of rescue money in 2010 and 2012, respectively.
While this seems like a blessing, Greece has received this money with reservations, much to the country’s dismay.
The bailout money came with strict regulations on the country’s spending habits. Spending cuts on defense, education, public sector wages, social security and civil servant jobs being decreased as people retire were some of the major sanctions. This coincided with an incredibly high 28 percent unemployment rate to create an agonizing climate for Greek citizens.
These living conditions created unrest within the country, and in late 2014, when Greek parliament failed to elect a prime minister, these issues surfaced. This spurred a new election in 2015 in which a member of Greece’s anti-austerity party was elected into office. This man, Alexis Tsipras, demanded changes to alleviate some of the regulations hurting Greek citizens.
Though Tsipras promised large changes, and he did negotiate a four-month extension to Greece’s bailout, his election has caused incredible controversy within the Eurozone.
Greece is required to comply with a list of reforms to receive more bailout money, but given its current stance, there’s a large possibility that this won’t happen. Without this money, Greece may be unable to make its next repayment of 460 million euros on April 9, causing the country to go bankrupt.
This bankruptcy could cause Greece to exit the Eurozone, an action which has come to be known as a Grexit, and instead use its own currency instead of the euro. This could lead to large impacts, not only for Greece, but also for the rest of the Eurozone. If Greece tosses the euro, investors may recognize the possibility for other countries in poor economic condition to exit the eurozone. This could cause the bankruptcy of Portugal, Italy and Spain. Multiple countries leaving the eurozone could send a wide ripple throughout the economy, potentially even affecting the United States by decreasing employment and exports.
Now, why does all this matter to you? It’s because of the last sentence I wrote: that this economic crisis on the other side of the world has a power to impact America’s economy and your job. Every day that you lay your head on your pillow is another day closer to April 9, when Greece’s economy could land in total failure, and it has the power to impact you.
I don’t like telling people to know things for the sake of knowing things. It’s not my place to spew economic information at you because I think it’s interesting. However, it is important that you have a working knowledge about how larger issues could affect you. It keeps you prepared for a large crisis and it allows you to have a voice in the conversation. Do you think Greece is demanding too much? Do you think the Eurozone is fair with their punishments? Regardless of your answer, if the entire international population held a mostly unified stance, I believe it’d be possible to effect an outcome that could deeply impact you.
And if that’s not enough, at least you learned the context for the word #Grexit.
Michael Schramm can be reached at firstname.lastname@example.org.