Greece suffered one of the worst recessions in its history. It has many negative economic indicators such as high unemployment rate, a huge Trade Deficit, a big foreign debt, and more. What was the main reason for this crisis? How could the cradle of the West become a nightmare? The answer is the Euro, a currency that in theory was going to improve living conditions. The Euro has created a lot of distortions and economic problems. The Euro stole the economic identity of Greece and caused a huge trade deficit.
National currencies can correct trade deficits
Countries export and import, and compete in global markets. There are countries that have more developed economies and they can export much more than they import. If a country imports much more than it exports, then, this country can devalue the local currency and reduce imports. Consumption of local products will increase and the trade deficit will be reduced this way. The point is that you can devalue if you have your own currency. Greece no longer has its own currency, it lost the Drachma a long time ago. The Greek economy has been kidnapped for a long time.
The Euro increased the trade deficit exponentially
Greece adopted a strong currency and its imports increased very fast.
Statistics show that in 1980 exports were $5.153 million and imports were $10.548 million. Traditionally, Greece has imported much more than it has exported but the trade deficit has been closed with income from tourism. A few years after Greece adopted the Euro the trade deficit began to grow. In 2008, one year before the global recession, Greek exports reached $26.382 and Greek imports reached $92.580.
The gap was too big and Greece could not devalue its currency to become competitive.
Foreign debt increased, the GDP plunged
The high level of imports increased the size of the foreign debt. Today, the size of the Greek economy is $195 billion. The size of the foreign debt is $460 billion. The Greek gross domestic product is just 42% of the foreign debt.
The mix of high trade deficit, a large amount of foreign debt and recession have caused an unemployment rate of 21.7%. Greeks are impoverished. Vehicle sales accounted for 306,875 units in 2007, but fell to 85,008 units in 2016. The Greek economy reached a size of $354 billion in 2008, but fell to $195 billion today. As we can see, the GDP is 45% less than it was in 2008. Clearly, it is time to say goodbye to the Euro.
