Abstract
Since late 2009 and the worldwide recession resulting from the American financial crisis, the Eurozone has faced a major sovereign debt crisis. Public debt-to-GDP and public deficit-to GDP ratios have increased sharply and are well over the limit fixed by the Stability and Growth Pact. However, among all European countries, Greece is definitely the worst affected. In 2011, the Greek real GDP fell by 7, decreasing for the fourth consecutive year and returning to its 2005 level. Industrial production is now comparable to its level prior to 1993. Naturally, unemployment exploded and reached about 25. Greece has also the highest current account deficit in the Eurozone (approximately 10% of GDP).
Moreover, Greece depends on bailout plans financed by the IMF and the Eurozone countries to meet its financial obligations and to service its unbearable debt burden. Its macroeconomic policy to cope with the crisis so far can basically be summed up in drastic austerity measures imposed by the so-called Troika in return for the bailouts. In spite of raising taxes and cutting the government spending, Greece's public debt has continued to increase. Consequently, many argue that austerity has proved to be unable to restore Greece's solvency in addition to having deepened the recession by declining demand.
