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Financial Crisis in Greece: Challenges and Threats for the Global Economy

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Financial Crisis in Greece: Challenges and Threats for the Global Economy International Journal of Economics and Financial Issues ISSN: 2146-4138 available at http: www.econjournals.com International Journal of Economics and Financial Issues, 2016, 6(S5) 1-6. Financial Crisis in Greece: Challenges and Threats for the Global Economy Mihail Nikolaevich Dudin1*, Vladimir Ivanovich Gayduk2, Vladimir Dmitrievich Sekerin3, Sergey Valeryevich Bank4, Anna Evgenevna Gorohova5 1Russian Academy of Entrepreneurship, 14, Radio Street, 105005 Moscow, Russian Federation, 2Kuban State Agrarian University, 13, Kalinina Street, 350044 Krasnodar, Russian Federation, 3Moscow State University of Mechanical Engineering, 38, Bolshaya Semenovskaya Street, 107023 Moscow, Russian Federation, 4Moscow State University of Mechanical Engineering, 38, Bolshaya Semenovskaya Street, 107023 Moscow, Russian Federation, 5Moscow State University of Mechanical Engineering, 38, Bolshaya Semenovskaya Street, 107023 Moscow, Russian Federation. *Email: [email protected] ABSTRACT This article is devoted to the research of the reasons behind the occurrence of the crisis in Greece and challenges and opportunities that arise both for the global economy and the economy of the European Union (EU). The theme of the article is rather urgent by reason of incomplete understanding of the nature of the crisis in Greece, its suddenness and impossibility to predict its consequences for the global economic relations. The main goal of stating the materials in this article is to analyze the reasons of the crisis in Greece in terms of economy, history, sociology, and other scientific areas. Basic tasks include the following: To reveal a complex of all aspects of the economic crisis in Greece, to analyze its deep (historical) reasons, and to reveal challenges for the world economy and economy of the EU and Russia related to the Greek crisis. The flowing basic conclusions were made within the article: (1) The crisis in Greece has not only economic but also political reasons. However, at the same time the Greek crisis cannot be solved only in terms of economy. It is necessary to take systematic measures to solve the occurred problems, (2) the economic crisis is only a visible part of structural problems of the Greek economy. At the present time a great number of social, technological, and humanitarian problems have been hidden behind the mass revealing of economic crisis tendencies, (3) the basic reason of the economic crisis is in the incompliance of social and economic model of the Greece development with the EU based on the West-European logics of functioning. Practical application of the results of this work by scientists and economists will allow to objectively reconsider the essence of the Greek crisis, and make conclusions that will contribute to the development of recommendations aiming at preventing the crisis in other countries. Keywords: Greece, Economic Crisis, European Union, Global Economy JEL Classifications: G01, N24, F63 1. INTRODUCTION Logically there is a question related to the reasons that attract closer attention to Greece in the whole world. And if these are The Greek economic crisis of the beginning of the XXI century global problems, what challenges does this crisis create for the is unprecedented both according to the duration and the size global economy? Or is this only deflecting attention from more of fall among the developed countries. Today the country that important problems and Greece is “the Gordian knot” where all has greatly contributed to the global civilization undergoes a negative features of the contemporary global economic order deep economic depression (Cheskidov, 2015; Sergeev, 2013). have concentrated? Over the recent years the national income of Greece has made up 0.25% of the global gross domestic product (GDP). As a In order to get answers to all these controversies, it is necessary consequence, the occurred crisis affects all countries of the to study the uniqueness of the Greek crisis. It is necessary to world (Kolodko, 2015). acknowledge and understand that the Greek crisis contains as much International Journal of Economics and Financial Issues | Vol 6 • Special Issue (S5) • 2016 1 Dudin, et al.: Financial Crisis in Greece: Challenges and Threats for the Global Economy policy as actually economy. The peculiarity of the Greek crisis enables the authors to systematically, comprehensively and lies in the fact that traditional methods, for example devaluation gradually reflect the interrelation of the reasons of occurrence of the national currency, cannot be merely used because Greece and consequences of the development and scaling of the crisis in is in the Eurozone and its currency (Euro) is common for other 26 Greece. Based on the obtained analytical and comparative data, European countries. The situation is complicated by the fact that basic problems that do not allow to eliminate crisis tendencies at legal procedure of withdrawing from the Eurozone is not provided the present time were defined. In addition, basic solutions were (Plotnikov and Novik, 2013). At the present time a number of defined, whose implementation will allow to decrease the urgency countries of the European Union (EU) like Greece, Ireland, of problems and direct the developed countries to the relatively Portugal, and Spain have a serious problem: After economic stable course. bubbles on the markets of consumption and residential property have burst, these countries have to experience a long period of 3. RESULTS recession. During this period they will have to pay a high interest on their sovereign bonds. Greece is the 73rd state according to the number of its population, and the 95th state according to its territory in the world. During The Greek economic and political crisis has been taking place the period from the end of the Second World War till 1973, the during many years, and has not completed after the latest global Greek economy was growing at priority rates (the annual growth economic crisis. It is necessary to note that excluding Greece from was not <7%, and in some years - not <10%). After the completion the Eurozone at least for some time and return to the drachma of the Second World War the Greek economy was recovered to use traditional devaluation of the national currency would due to using a number of measures, including the ones that were be one of possible solutions contributing to the decrease in the provided by the “Marshall Plan.” It is necessary to single out the acuteness of the accumulated problems. Although this solution following measures: had been discussed by European politicians, it was eliminated • Measures aiming at abrupt devaluation of the national from the agenda in 2011 (Miroshnikov, 2013; Malakhova et al., currency (Drakhma) in order to recover the economic potential 2011). Herewith, few experts can predict consequences of the of the country lost during the invasion withdrawal of Greece from the Eurozone. It is quite likely that • Measures aiming at the raising foreign investments required the most dangerous consequence can be “the domino principle” for recovering the infrastructure of the country and its when Italy, Portugal, Ireland, Spain, or Britain (in 2016 the latter recreational potential, including tourism development intends to have a referendum about possible withdrawal from the • Measures aiming at the development of the industrial sector of EU) will leave the Eurozone and entirely the EU after Greece. economy (first of all chemical industry) in order to integrate All these countries are combined in a single group - PII(G)S the country in the global economic processes, and although according to the crisis duration Greece is distinguished • Measures aiming at developing mass construction not only among them. to provide the adequate level of the population life but also to diversify the GDP. Regular allotment of credits both from the International Monetary Fund (IMF) and European structures in exchange for promises The priority rate of the Greek economy growth was over in 1974 to implement reforms in Greece contributes to the growth of (then the fall of GDP was about 6%). It was related to the change negative information in the global informational space that like of the political regime and political order. At a later stage the social a catalyzer aims at occurring of panic spirits in the Eurozone. and economic growth of Greece recommenced, its inconsiderable Greece is a classic example of fiscal and economic irresponsibility decrease was observed in the 1980s. It was related to the general of almost all global governments after the Second World War. For economic stagnation. Thus, starting from the 1950s till the the whole period of the Greek crisis the IMF and the European global financial and economic crisis that started in 2008, Greece Central Bank have allotted above USD 300 billion of financial had been one of the most successfully economically developed help as term credits (Markantonatou, 2013; General and Regional countries on the European continent. When world-wide crisis Statistic, 2015). tendencies overgrew, crisis tendencies in the Greek economy started occurring. They were both a part of its own debt crisis and 2. METHODOLOGY a part of the general European debt crisis (Figure 1). The theoretic basis of the article was the works of leading In addition, after the priority rate of the economic growth that was researchers in the area of macro-economy, global financial and over in 1974, the annual budget of Greece was at a sustainable economic crises. Special attention is paid to the
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