Greece gave European civilization the foundational elements of math, philosophy and literature - but it's now causing more headaches than anything else.
Leading up to the financial crisis, the Mediterranean nation employed a number of accounting dodges to hide the severity of its deficits and overspending from European Union oversight. When the credit crisis hit, therefore, Greece took a harder beating than many other developed nations - a problem made worse by the country's sclerotic bureaucracy and deficient tax collection system.
After its financial state worsened considerably and yields on Greek debt soared, the country took a €45 billion bailout from the International Monetary Fund and the rest of the EU. At the same time, it pushed through new and harsh austerity measures to curb the surging public debt.
Since then, the debt crisis has torn through the economies of Ireland and Portugal and still threatens to destabilize more critical countries like Italy and Spain. Yet the bailout has failed
to dramatically improve the situation of the beleaguered Greeks, who still must face high borrowing costs, rampant unemployment and ineffective government.
EU finance ministers meet today in Brussels to discuss how to move forward a year after the original bailout.
"The biggest fight is between Germany and the European Central Bank (ECB)," writes The Economist. "Germany’s politicians do not want to lend Greece more money without a “game-change” in the rescue plan. That could include bold new concessions from the Greeks, such as pledging privatisation proceeds as collateral for new rescue funds. Or it could imply a debt restructuring."
One effect of the continued European troubles on the foreign exchange
markets has been a boost for haven currencies like the Swiss franc. That country's currency tends to rise when other major stores of value, like the euro and the dollar, decline.
"You could argue that the Swiss franc is going up because there’s greater concern about the euro periphery," Daragh Maher, the deputy head of global foreign exchange strategy at Credit Agricole in London, told Bloomberg News
. "There doesn't seem to be much conviction to euro buying. People are still very nervous."
However, the euro rose against the dollar on speculation that the EU would continue to support its weakest members.