Overall Greek GDP experienced a 7. There were key differences in the effects of the Greek programme compared to these for other Eurozone bailed-out countries. According to the applied programme, Greece had to accomplish by far the largest fiscal adjustment by more than 9 points of GDP between and  , "a record fiscal consolidation by OECD standards ". The negative effects of such a rapid fiscal adjustment on the Greek GDP, and thus the scale of resulting increase of the Debt to GDP ratio, had been underestimated by the IMF, apparently due to a calculation error.
Initially, this recapitalization was accounted for as a debt increase that elevated the debt-to-GDP ratio by During the first warrant period, the shareholders in Alpha bank bought back the first 2. Once HFSF liquidates its assets, the total amount of recovered capital will be returned to the Greek government to help to reduce its debt.
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Initially, European banks had the largest holdings of Greek debt. As of , various European countries still had a substantial amount of loans extended to Greece. This extended the deal that EIB would lend million euros. In hindsight, while the troika shared the aim to avoid a Greek sovereign default, the approach of each member began to diverge, with the IMF on one side advocating for more debt relief while, on the other side, the EU maintained a hardline on debt repayment and strict monitoring.
Polls showed that the vast majority of Greeks are not in favour of leaving the Eurozone. From to , the Greek GDP declined by more than a quarter, causing a " depression dynamic" in the country. Key statistics are summarized below, with a detailed table at the bottom of the article. The IMF reported on 2 July that the "debt dynamics" of Greece were "unsustainable" due to its already high debt level and " In response to the crisis, the Greek governments resolved to raise the tax rates dramatically.
A study showed that indirect taxes were almost doubled between the beginning of the Crisis and This crisis-induced system of high taxation has been described as "unfair", "complicated", "unstable" and, as a result, "encouraging tax evasion". As of , five indirect taxes had been added to goods and services.
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The ensuing tax policies are accused for having the opposite effects than intended, namely reducing instead of increasing the revenues, as high taxation discourages transactions and encourages tax evasion, thus perpetuating the depression. Greece not only has some of the highest taxes in Europe, it also has major problems in terms of tax collection. Much of this is due to the fact that Greece has a vast underground economy, which was estimated to be about the size of a quarter of the country's GDP before the crisis.
The International Monetary Fund therefore argued in that Greece's debt crisis could be almost completely resolved if the country's government found a way to solve the tax evasion problem. A mid report indicated Greeks have been "taxed to the hilt" and many believed that the risk of penalties for tax evasion were less serious than the risk of bankruptcy.
Greek government-debt crisis
By , tax receipts consistently were below the expected level. Data for placed the Greek underground or "black" economy at A January report  by the DiaNEOsis think-tank indicated that unpaid taxes in Greece at the time totaled approximately 95 billion euros, up from 76 billion euros in , much of it was expected to be uncollectable. One method of evasion is the so-called black market, grey economy or shadow economy: work is done for cash payment which is not declared as income; as well, VAT is not collected and remitted.
The social effects of the austerity measures on the Greek population were severe. Consequently, because of financial shock, unemployment directly affects debt management, isolation, and unhealthy coping mechanisms such as depression, suicide, and addiction. Many unemployed Greeks cycled between friends and family members until they ran out of options and ended up in homeless shelters.
These homeless had extensive work histories and were largely free of mental health and substance abuse concerns. The Greek government was unable to commit the necessary resources to homelessness, due in part to austerity measures. A program was launched to provide a subsidy to assist homeless to return to their homes, but many enrollees never received grants. Various attempts were made by local governments and non-governmental agencies to alleviate the problem.
Athens opened its own shelters, the first of which was called the Hotel Ionis. In a study by Eurostat , it was found that 1 in 3 Greek citizens lived under poverty conditions in Horse racing has ceased operation due to the liquidation of the conducting organization. Paid soccer players will receive their salary with new tax rates. In and , the government was encouraging the use of credit card or debit cards to pay for goods and services in order to reduce cash only payments.
By January , taxpayers were only granted tax-allowances or deductions when payments were made electronically, with a "paper trail" of the transactions. This was expected to reduce the opportunity by vendors to avoid the payment of VAT sales tax and income tax. By 28 July , numerous businesses were required by law to install a point of sale device to enable them to accept payment by credit or debit card. Failure to comply with the electronic payment facility can lead to fines of up to 1, euros.
Krugman suggested that the Greek economy could recover from the recession by exiting the Eurozone "Grexit" and returning to its national currency, the drachma. That would restore Greece's control over its monetary policy, allowing it to navigate the trade-offs between inflation and growth on a national basis, rather than the entire Eurozone.
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However, the consequences of "Grexit" could be global and severe, including:    . Greece could accept additional bailout funds and debt relief i. However, austerity has damaged the economy, deflating wages, destroying jobs and reducing tax receipts, thus making it even harder to pay its debts. A restructuring of all debt, not just in Greece but in several European countries, is inevitable.
He warned that: "If we start kicking states out, then Financial markets will immediately turn on the next country. Germany has played a major role in discussion concerning Greece's debt crisis,. Hypocrisy has been alleged on multiple bases. In the millions of words written about Europe's debt crisis, Germany is typically cast as the responsible adult and Greece as the profligate child. Prudent Germany, the narrative goes, is loath to bail out freeloading Greece, which borrowed more than it could afford and now must suffer the consequences.
In other words, they lent more than they could afford. Germany's banks were Greece's enablers. German economic historian Albrecht Ritschl describes his country as "king when it comes to debt. Calculated based on the amount of losses compared to economic performance, Germany was the biggest debt transgressor of the 20th century. OECD projections of relative export prices—a measure of competitiveness—showed Germany beating all euro zone members except for crisis-hit Spain and Ireland for , with the lead only widening in subsequent years.
One way to do that is to allow higher inflation in Germany but I don't see any willingness in the German government to tolerate that, or to accept a current account deficit. Part of the effort to re-balance Europe also has to been borne [sic] by Germany via its current account. Paul Krugman estimates that Spain and other peripherals need to reduce their price levels relative to Germany by around 20 percent to become competitive again:. If Germany had 4 percent inflation, they could do that over 5 years with stable prices in the periphery—which would imply an overall eurozone inflation rate of something like 3 percent.
But if Germany is going to have only 1 percent inflation, we're talking about massive deflation in the periphery, which is both hard probably impossible as a macroeconomic proposition, and would greatly magnify the debt burden. This is a recipe for failure, and collapse.
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The US has also repeatedly asked Germany to loosen fiscal policy at G7 meetings, but the Germans have repeatedly refused. Even with such policies, Greece and other countries would face years of hard times, but at least there would be some hope of recovery. With regard to structural reforms required from countries at the periphery, Simon Evenett stated in "Many promoters of structural reform are honest enough to acknowledge that it generates short-term pain.
If you've been in a job where it is hard to be fired, labour market reform introduces insecurity, and you might be tempted to save more now there's a greater prospect of unemployment. Economy-wide labour reform might induce consumer spending cuts, adding another drag on a weakened economy. Claims that Germany had, by mid, given Greece the equivalent of 29 times the aid given to West Germany under the Marshall Plan after World War II have been contested, with opponents claiming that aid was just a small part of Marshall Plan assistance to Germany and conflating the writing off of a majority of Germany's debt with the Marshall Plan.
The version of adjustment offered by Germany and its allies is that austerity will lead to an internal devaluation, i. This view too has been contested. A February research note by the Economics Research team at Goldman Sachs claims that the years of recession being endured by Greece "exacerbate the fiscal difficulties as the denominator of the debt-to-GDP ratio diminishes". Strictly in terms of reducing wages relative to Germany, Greece had been making progress: private-sector wages fell 5.
In contrast Germany's unemployment continued its downward trend to record lows in March ,  and yields on its government bonds fell to repeat record lows in the first half of though real interest rates are actually negative. All of this has resulted in increased anti-German sentiment within peripheral countries like Greece and Spain.
When Horst Reichenbach arrived in Athens towards the end of to head a new European Union task force, the Greek media instantly dubbed him "Third Reichenbach". Perhaps to curb some of the popular reactions, Germany and the eurozone members approve the budget of Greece, which called for no further pension cuts, in spite of the fact that these were agreed under the third memorandum. Such a level is considered [ by whom? In a report, the IMF admitted that it had underestimated the effects of such extensive tax hikes and budget cuts on the country's GDP and issued an informal apology.