Greek Debt Crisis: Part 1

The European Union has a policy that no member should have a deficit totaling more than 3% of its GDP. Greece is currently around 13% of its GDP. During recessionary periods, deficits should rise as governments initiate stimulus plans in order to get the economy up and running again. The real problem lies with the fact that Greece has only observed the 3% rule once in the past decade.

Greece has had a continuing problem with a higher deficit for some time now. As a result, many banks in Germany and France have lent Greece billions of dollars in support. The question has changed from "Will there be a bailout?" to "What are the details of the bailout?" A bailout is unpopular in Germany and France as they have both invested a fair amount in Greece and would shoulder a lot of the costs.

Greece is supposed to instill some clear cut ways to trim its deficit by 4 percentage points by March 16. If they are unsuccessfully able to do so, the EU will demand specific changes designed to bring in more tax revenue. Greece has already been selling bonds to raise money to pay off some of its short term debt. Its ability to continue to finance debt and install deficit reducing methods will determine how quickly Europe will emerge from financial and recessionary conditions.