Academic journal article Monthly Labor Review

Why Greek Sovereign Debt Matters to Us

Academic journal article Monthly Labor Review

Why Greek Sovereign Debt Matters to Us

Article excerpt

Because the financial crisis in Greece could lead to political and civil unrest within the country and has caused concerns about the stability of the euro and its impact on the world economy, Greek financial troubles are of international importance.

In "Demystifying Sovereign Debt in Greece: Why It Matters to Us" (EconSouth, Federal Reserve Bank of Atlanta, second quarter 2010, http://www.frbatlanta.org/docu ments/pubs/econsouth/10q2_ greece.pdf), economic analyst Andrew Flowers explains the Greek money crisis, its potential repercussions on both the euro nations and the global economy, and what lessons it holds for other countries dealing with large budget deficits.

Flowers notes that while Greece has led the pack among euro countries in terms of running large budget deficits and carrying a high debt-to-GDP (gross domestic product) ratio, Greece is not alone in its fiscal problems. Several other European countries, including Italy, Ireland, Spain, and Portugal, are also dealing with large deficits.

The severity of Greece's fiscal crisis was revealed in October 2009 by the newly appointed Greek finance minister. Investors began to lose confidence in the country's sovereign debt, resulting in widening bond and credit default swap spreads. By December of the same year, the government proposed the first of several austerity measures to help lower the budget deficit; these measures were met with investor skepticism and objections from protestors. …

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