Before Greece Debt Crisis it have a high potential value in the world especially in European countries but in 2007 recession it faces a lot of crisis and the reason for this crisis are discussed in Stability and Growth Program published in 2010 by Greek Ministry of Finance. In this report five main reason are discussed which are:
Poor GDP growth
Government debt and deficits
Budget compliance and data credibility
Excess government spending
Current account deficits and tax avoidance
2.1 Poor GDP growth:
After recession in 2008 the GDP growth becomes lower than Greek national statistical agency. The finance minister of Greek reported that we are trying to improve our competiveness by reducing salaries and bureaucracy also redirection the government spending from non-growth sectors like the military into growth-stimulating sectors.
Global Financial crisis have a large negative impact on GDP growth rate of Greece. Tourism and shipping which are the largest earners were affected badly by reduction in revenues by 15% in 2009.
2.2 Government deficit:
Fiscal imbalance developed from 2004 to 2009 implies that output is increased in nominal terms by 40% but the central government primary expenditures increases 87% and against an increase of 31% in tax revenue. Ministry tries to implement real expenditure which helps expenditure to grow 3.8% from 2009 to 2013 with below expected inflation at 6.9%. The overall revenues are expected to grow by 31.5% from 2009 to 2013, which are secured by new, higher taxes and a major reform of an ineffective tax collection system. This deficit needs to be decline by a level of compatible with declining debt to GDP ratio.
2.2.1 Government debt:
The obligation expanded in 2009 due to the higher than anticipated government shortfall and higher obligation benefit costs. The Greek government surveyed that basic monetary changes would be lacking, as the obligation would in any case increment to an unsustainable level before the positive consequences of changes could be accomplished. Not with standing extra changes, lasting and brief starkness measures (with a size in respect to GDP of 4.0% of every 2010, 3.1% out of 2011, 2.8% out of 2012 and 0.8% out of 2013) were required. Changes and significance measures, in blend with a normal return of positive monetary development in 2011, would lessen the pattern deficiency from €30.6 billion out of 2009 to €5.7 billion of every 2013, while the obligation/GDP proportion would balance out at 120% out of 2010– 2011 and decrease in 2012 and 2013.
After 1993, the obligation to-GDP proportion stayed over 94%. The emergency caused the obligation level to surpass the most extreme manageable level (characterized by IMF financial analysts to be 120%). As per “The Economic Adjustment Program for Greece” distributed by the EU Commission in October 2011, the obligation level was required to achieve 198% out of 2012, if the proposed obligation rebuild assertion was not actualized.
2.3 Budget compliance:
Budget compliance was required to have some improvement. 2009 was be a lot of worse than normal because of economic control being negligent in a year with political election. Government wanted to be strengthened the monitoring system in 2010 and make them possible to track revenues and expenses,