There has been a clear shift in opinion after the Greek election in early May failed to form a new government.
It appears that Greece cannot come to a decision on who will lead the country out of the economic crisis. A centre-right and centre-left part who previously lead the campaigns, lost votes because they failed to win enough seats to form a coalition government. The far left and far right parties share received very little common ground except for their agreements to end austerity measures, which were imposed by lenders outside of the country. Another election may be needed to solve the problem as it seems that a coalition government will not be taking lead of the country.
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As EU economy struggles to gather strength after Greece failed elections, the country's debt climaxed to a position where it could no longer make repayments and was forced seek financial help from its European partners and the International Monetary Fund (IMF) in the form of massive loans.
Raising the size of bail-out funds is proposed to reassure markets, however Germany seems reluctant to act on this new strategy, fuelling concerns that Greece may default on billions of euros of loans. Meanwhile, politicians and bureaucrats have been seeking a lasting solution to the country's debt problem and to re-organise Eurozone economic governance
The crisis has had significant impact on other European countries and some outside the Eurozone, such as the United States. The European Union which seemed promising a few years ago has found itself under much scrutiny as concerns of its longevity grows. The one question on the minds of many especially in the world of corporate finance is; what is the future of a monetary union of countries lacking political unanimity?
At the end of world war two, leaders of European countries introduced a number of regulatory bodies that holds major states together. This act reached its peak in the nineties with the introduction of the EU and the creation of the EMU which is the European Monetary commission with a common currency that is the Euro.
The system was effective until the global financial crisis that kicked in 2008 and causing budgetary issues for countries in the EU, mostly Ireland, Portugal, Spain, Italy and Greece. Greece received the biggest hit and being unable to meet certain fiscal sobriety standards which all EU nations are required to meet to join the EMU added to the already pilling problems.
Before EMU, borrowing costs were high due to concerns about inflation level, but this was resolved when the European Central Bank took control of monetary policies causing interest rates for individual European countries debt to drop. Due to these developments and the availability of cheap foreign money, Greece made some internal changes, such as increasing social benefits and easing early requirement conditions meanwhile leaning on deficit to support these expenses. This combined with unstable tax mismanagement drove the financial crisis.
In 2010, Greece experienced a huge fall in revenue, while costs rose vigorously. The country struggled to pay debts and so, triggering higher interest rates. The situation in Greece brought fresh concerns for the rest of the EU nations. A number of bail-out attempts and back up funds were offered which meant that Greece was subject to austerity measures leading to increased unemployment and reduced government spending.
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