Since joining the eurozone in 2001, Greece has faced numerous financial difficulties. However, it was not until the global financial crisis struck in 2008 that the seriousness and magnitude of Greece's financial troubles was revealed. As of January 2011, all three credit-rating agencies had reduced Greek debt to junk status. Today, even though Greece has received €110 billion in bailout money from the EU and the IMF, economists around the world are predicting that Greece will inevitably default on its loans.
Although its national debt is currently 160% of its GDP, not everyone sees Greek default as inevitable. The Greek government has been scrambling to find ways to raise more money in order to avoid a default and to get a second bailout from the EU and IMF. Last Friday, Greek Prime Minister George Papandreou and the Greek parliament agreed to additional, and highly contested, spending cuts in order to meet the targets necessary in order to receive bailout money. However, to keep meeting these targets set by the EU and IMF, Greece still has to raise €600 million by the end of the year.
If Greece goes into default, the effects will spread far beyond Greece's boarders. Economists predict that a Greek default could also lead to default in Portugal and Ireland, two other eurozone countries who received large emergency loans following the 2008 financial crisis. Further, the risk of Greek default has lead to tension throughout the eurozone and has increased the instability of the euro itself. Germany, the nation that has most successfully weathered the economic downturn, is getting more and more infuriated by additional requests to lend money to Greece and other eurozone nations. Greek citizens are not happy with the deal they have been given from the EU and the IMF either, as protests continue amid the government putting into effect further austerity measures in an attempt to secure additional loans. Although widespread devastation could spread across much of Europe and the world if Greece defaults, leaders at the EU and IMF have been slow to agree to any solutions to address Greece's continued struggles.