EU signed Maastricht Treaty, under which EDP was defined in article 104. According to the treaty, fiscal surveillance concerning public debt is based on the EDP method. The Treaty obliges Member States to comply with budgetary discipline by respecting two criteria:
Economic Indicator Listing in Year 2010 <60% 60-80% 81-100% 101-120% 121%+ Spain Netherland s Cyprus Greece Italy Malta Austria UK Hungary France Germany Ireland Iceland Port. Belgium
Public debt/GDP reached 142% in 2010. Increasing tax rates Rising unemployment rates Greek government now has to pay rates of up to 30% to borrow. The government is facing auction sale of the country’s assets so that foreign governments and banks can get their money back
Greece joined EU in 1981. No real growth has been achieved since public expenditures were largely used to plug gaps in the Greek budget that was struggling to meet the costs of pensions and other current expenditures
Since EURO ZONE accession in 2001, the local currency had been replaced by a big global currency, the euro. This allowed Greece’s borrowing costs to fall sharply, cutting the cost of public sector borrowing and the interest rates paid on business and personal loans الرواج التجارى Household sector Private sector Public sector Greece’s household savings rate fell from 3.2% in 2000, pre-EMU, to minus 3.2% in 2006, by 2007 the debt-to- income ratio of Greek households had quadrupled to 65%. Borrowing increased rapidly due to weak bank prudential regulations The increase in consumer spending caused the country’s current account deficit to rise by 14-15% of GDP, with inflation each year being 1-2% above the euro country average Borrowing increased rapidly due to weak bank prudential regulations
Total debt to foreign banks at the end of 2010 amounted to $174bn. Yet the breakdown of this huge debt is as follows: Nevertheless, the government is responsible for: 1.Reducing tax rates and in turn public revenues. 2.Increasing current public expenditures. 3.They took advantage of derivative financial products to make a portion of the government deficit ‘disappear’ from the view of Europe’s accountants. 37% government debt 8% Greek banks 55% non-bank private sector
Greece faces prolonged austerity and the auction sale of the country’s assets so that foreign governments and banks can get their money back Since 2009, the government was in a big trouble with foreign banks demanding back their money. All these solutions failed since the government was capped by rising demonstrations.