Greece is a developed country with an economy that ranks at 13

th
among the 28-country EU countries.
Greece was accepted into the Eurozone in 2000, which was followed by a period of GDP growth at
around 4% until 2006. Recently, the Greek government suffered from a debt crisis, and is still in the
process of recovery.
The Greek economy mainly consists of the service sector, which makes up 80.6% of the economic output,
while industry makes up 16%, and agriculture 3.4%. Among the industries in the service sector, shipping
and tourism are the most prominent, making up 25% of the GDP together.
Poor governmental fiscal policy in combination of existing weakness in the economy caused the 2009
debt crisis. Prior to the crisis, the GDP growth level had been lowered than expected. Meanwhile, poor
fiscal policy developed a high governmental deficit and raised debt-to-GDP level. In 2008, the debt was
at an unhealthy level of 150% of the GDP. However, Greece was able to control the situation with a
strong economy that it had in the mid-2000s.
As the global recession in 2008 hit, Greece was greatly impacted, as its two primary industries, shipping
and tourism, are fragile to economic changes. In September 2009, Greece ran a deficit at 12.7% of its
GDP, a highly dangerous level. At this time, Greece was predicted to have a high chance of defaulting. As
a member of the Eurozone, Greece couldnt use monetary policy to fix the situation, which was a
measure the US took during the crisis.
In April 2010, Greece requested a 45 billion euro loan from EU/IMF. At the same time, the
creditworthiness of Greek government bond was downgraded to junk level. In May, the Eurozone and
the IMF agreed to a three-year 110 billion euro loan, while the Greek government announced austerity
measures. The austerity was faced with several violent strikes, which caused political ripples in the
Greek government. In agreement with its debt holders, Greece further proposed a 28 billion euro
spending cut over the next five years.
This rescue package was proposed by EU, European Central Bank (ECB) and IMF. The terms of this plan
included reducing the budget deficit to below 3% by 2014. IMF contributed 30 billion euro among the
110.
In July 2011, as the situation was not relieved yet, euro area leaders agreed on extending the loan
repayment from 7 years to 15 years and cut interest rate to 3.5%, along with a new 109 billion euro loan
package, as well as a demand to enforce privatization in the economy. In 2011, Greece suffer its worst
GDP decline with -7.1%, with 111,000 companies going bankrupt and unemployment rising to a record
high of 19.9%.
This second package was revised in October 2011. The new plan included cutting the debt from 160% to
120% of the GDP by 2020, which required all owners of Greek governmental bonds having to accept a 50%
haircut of their bonds and accepting an interest rate of 3.5%. Furthermore, the Greek government
needed to utilize austerity measures to reduce budget deficit and maintain the measures even if a new
government is formed.
As of now, Greece is still in the process of receiving the second bailout plan, although heavy political
instability has been hindering the reconstruction process.