It all started in 2002 when the country gave up its currency ‘drachma’ in favor of the euro to reform its economy for easier borrowing.
Money borrowed and money spent and the downfall started. Money lenders started charging high interest, which led to tax evasion and Greece was in doldrums.
Greece has not been able to deal with the crisis which was more to do with the euro. Now it appears the crisis would spiral to the rest of the European Union, and poses threat to the decade old euro.
This is one classic example what happens when policymakers do not anticipate and fail to apply crisis management at the first place. The prime thing, when dealing with a crisis is to “take it head-on, but unfortunately this was not the case here.
The recent crisis is in many ways was brought upon to itself by Greece only. Forging data on deficits to make public finance look genuine was the start of it. They just did what they are known for ‘Spent more than what you could pay for‘.
They fail to realize that any country that incurs more than 100% debt (GDP), results in banking crisis. In the present situation Greek citizen will start pulling out their money from banks, which in return will create liquidity shortage. They may even be ejected out of the EU for others to survive. So anyway you look at it the crisis is inevitable.
Austerity measures means wage cut and will do no good, but now that the citizen are already started rioting on streets the move seems skeptical.
Greece reputation is at stake and they need to send out message loud and clear, that they are willing to transform and well-enough explain this to their citizen. Infuse confidence in the international community and generate opinion so they are taken seriously. Initiate steps to garner faith and chalk out well-planned long-term reforms.
To change is a matter of reputation, and Greece must continue to do so to survive.