The financial media loves to move from crisis to crisis and spice things up by creating eye-catching headlines! Over the course of the last few months an old friend has popped back up as the lead story and it isn’t due to being the birthplace of the Olympics or tasty baklava. Greece is once again in a financial crisis and its future will not only impact Europe but also economies around the world.
While the issue is complex and there are many moving pieces what it ultimately comes down to is Greece has a spending problem. The country is like a college freshman that just got their first credit card and has gone on spending spree oblivious to any repercussions. Picture that freshman opening their first bill after they have decked out their dorm room and realizing they can’t make even the minimum payment. This is the dilemma that Greece is facing… again!
How did we get here?
To keep it simple, Greece has built up a mammoth amount of debt by spending more than it generates. The balance sheet for the country is essentially covered in red ink. The retirement age in Greece is 57 (62 in the U.S.) creating an additional burden on the country. Tax evasion is also a huge issue for the country; Greek politicians have often referred to it “as the national sport”. It’s estimated that over $30 billion per year goes uncollected in taxes. Continue reading