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International Finance and Investment-The Greece Debt Crisis

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  1. Introduction
  2. Major Causes of Greece Building up Such Unsustainable Debt Levels
  3. Why the Greece Debt crisis concerns the International Authorities ?
  4. Consequences for Global Markets if Greece Default
  5. Reactions of Asia Markets to the Downgrade of Greece's Bonds to Junk Status
  6. Reasons for Standard & Poor's Downgrade Greece's Bonds to Junk Status
  7. Conclusion

Human fallibility ripped off Greece the dignity accorded to its rich history as the economy has been marred with endless conflicts, whose effects spreads beyond its national frontiers. The events revealing themselves in the Greece economy have caught the entire Eurozone in denials and bargains of accepting the reality of high debts. What led to the mess? With most banks demanding return of their money, it might insinuate a thinking that the Greece Debt crisis ensued from the failure of the banking system. However, though blaming the financial sector for Greece economic troubles appears popular, it denies facts on the root cause of system lapses that propagated such mess. Rare are the times the policies implemented by the national governments adapts to the economic events, and in most cases their implementation postpones resolving the underlying problem, causing further confusion when crafting late hours solutions. The Greece debt mess of 2010 initiated from an ideational development surrounding capitalist crisis pokes holes to the dominant neo-Keynesian narratives with present renascent austerity descriptions offering little gain. The broader inquiry of the Greek debt crisis reveals impact of recent ideational changes translating to sovereign debt crisis, whose origin track to artificial-generated factors.

[...] Stavrakis, T EU Dismisses IMF Report on Criticizing Handling of Greece's Debt Crisis. [Online] Available at: [Accessed 09 September 2013]. GREECE DEBT CRISIS 21 Sutton, C S&P downgrades Greek debt to junk status. [Online] Available at: [Accessed 10 September 2013]. Thomson Reuters IMF says it lowered bar for Greece bailout program. [Online] Available at: [Accessed 09 September 2013]. Vyas, M the Origin of Greek Soverign Debt Crisis. [Online] Available at: [Accessed 08 September 2013]. [...]

[...] This would spark off a cycle of capital and investment inadequacy, further hurting the enterprise and consumer segments. Although the stock prices would decline and make them appear cheaper, investor confidence would decline and take longer for the economy to recover (Durden, 2011). GREECE DEBT CRISIS Grinding economy In the event that Greek defaults, this would trigger a series of turmoil larger than previous defaults of Argentina and Russia owing to the size of the debt currently at $500 billion. [...]

[...] In its place, the fear of initiating a political suicide forced the politicians take up the easiest of continual borrowing despite the expenditure and revenue gap widening. As a result, interest gradually became a burden in tandem with the public debt, only revealed in 2008-09 when it was too late for the economy to bear (Vyas, 2011). GREECE DEBT CRISIS Why the Greece Debt crisis concerns the International Authorities After the financial downturn hit the global economy, hidden borrowings of the Greek governments became evident as the country ran above what its revenue generation afforded. [...]

[...] In view of this, the ECB is most concerned with the contagious effect across the Eurozone and the effort of reviving the banking system. Specifically, the ECB has bought Greek government bonds as collateral for lending to provide liquidity (ACCA p.3). GREECE DEBT CRISIS Contagious Effect of Debt Instability Predictable debt instability reflects among other things deterioration of economic growth and failure of automatic stabilizers leading to rapid build-up of government debt in an environment of financial instability (ECB p.55). [...]

[...] Given that the solutions to the debt crisis are yet to accomplish intended results, downgrading the government bonds have made the market skeptical to avoid a repeat of investment loss already experienced during haircuts. GREECE DEBT CRISIS References ACCA The European Debt Crisis. [Online] ACCA [Accessed 09 September 2013]. Davis, A Greece's Debt Cut to Junk, First for Euro Member. [Online] Available at: [Accessed 09 September 2013]. Durden, T What Happens If/When Greece Defaults And A Primer For Next Steps For The Euro Area. [Online] Available at: [Accessed 09 September 2013]. [...]

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