The Greece debt crisis is hiking every day. European Union is trying to be relaxed about the whole situation; on the other hand Greece government is acting “cool” over the social media to show nothing happened actually.
Now isn’t it something obvious happening? The cause of this crisis is hiding within the History of world politics. Greece should have been out of European Union. But historically that didn’t happen and that is one of the grass root causes of this crisis. Greece never followed the rules of governing debt levels. But from the early days it was easy to understand that the debts of Greece will become higher with time. If we consider the size of economy then the debt is very high. Strategically Greece has always managed not to disclose the real situation but after the recession it becomes evident that the country will face a big financial crisis. Previously they have faced the crisis in 2010 or even in 2012. The real side of the story is it is impossible for Greece to repay its debt. The GDP is 178% which shows that it is unsustainable. The economy is shrinking everyday and the debt is increasing. The choices are very narrow now, write off a good amount of debt or leave the European Union.
It is true that the Greece crisis will not alone bring Europe into an unstable financial condition but the economy of Greece is big. Nobody can predict if the situation goes like this how it will affect the global financial situation. Globally, finance is a linked phenomenon; everything is connected so If one country drowns with debt then by default it will affect the world economy. The main concern is the bank, the collapse of banking sector has moved the global financial observers and they are predicting something bad again. Now if the other European nations decide to help Greece then the EU will face collapse.
Greece is one the pillars of modern democracy but the unfortunate economic policies have made this situation and the ordinary people will get affected largely. If Greece leaves the EU then the impact will be dangerous as the present economy of Greece is shattered. Unemployment, price hike and other issues will damage the normal life of people. Greece will face losses on all outstanding loans from EU nations. The European Central Bank and emergency funding will not work then. The other side of the story is the private debts held by banks. Many banks and IMF are attached with this financial scenario. E countries should. The only option is to give Greece debt write off. But the other countries should agree in that matter.
It is very difficult to predict that how the economy will become stabilized. First the government should look into the daily life of the mass and stabilize the banking sector. The capital control and the high restrictions over money withdrawal should get the propriety and remove slowly that will help to control the situation.
Effect on India
The economic crisis of Greece can also affect India’s capital outflows but the effect will not be very high or immediate. With time if the crisis continues then this may happen.
Government is taking help from RBI to face the situation. The main effect will be through Europe as India has a very less economic communication with Greece but India has a good economic relationship with Europe. So now if the Greece debt crises affect the economy of Europe largely then that will affect India’s economy too. If the crisis affects the Euro in a large way then the money market of India will also face some problems. Till the time Euro is in a stable situation that will not affect the Indian Stock Market. The government has informed media that they don’t have any idea about any company’s personal dependence on Greece but if there is any then they have to deal the situation by their own. India with the help of RBI is ready to face the difficulties if something happens.