By: Mike Campbell
Greece is a member of the 16 strong Eurogroup; the nations within the European Union that have chosen to abandon a national currency in favour of the Euro. To join this club, certain criteria had to be met and public spending and inflation need to be kept under control. To the surprise of some, Greece made the cut and joined the Euro in the first wave of membership when the physical currency came into being in January 2002. In many quarters, scepticism had been expressed on the exactitude of Greek financial figures relating to public sector borrowing and inflation.
During the current financial crisis, Greeks had a change of government and a clearer picture has emerged about the status of the Greek economy. The Greek budget deficit at 12.7% is more than four times the permitted maximum; Greek debt is more than 112% of its GDP (the target is less than 60%). The credit worthiness of Greece has been downgraded by both Fitch and Standard and Poor’s credit rating agencies. Some analysts have suggested that the Greek crisis has triggered the recent decline in the Euro. Against this backdrop, the government announced the austerity measures that it hopes will set the nation back on the track to fiscal rectitude. The measures include: a public sector pay freeze; increased duty on fuel; a 10% cut on public sector spending and an increase in pensionable age. The measures will be extremely unpopular with the electorate. However the move was welcomed in Brussels. The EU Commission has indicated that the Greek economy will be under stringent monitoring, due in no small part to its previous dubious statistical data.
Greece Outline Its Plans To Get The Economy Under Control
DailyForex.com