Understanding the Greek Financial Crisis

After last week's referendum, all eyes have been on Greece. For many of us, it is quite difficult to understand how the Greek Financial Crisis has happened, and how it affects the people of Greece, and those countries who use the Euro. Here are the basics of the situation.

What is the Euro?
The Euro () is a currency used by nineteen in Europe. In 1999, the currency was launched to make it easier for trade between European countries, as before, money was lost in currency conversions. This meant that businesses were losing money when trying to trade between their neighbors. Thus, the Euro was born. Many countries in the European Union, including Germany, France, Ireland, Spain, and many others, agreed to use the same currency to improve the relations with their neighbors. At this point, those in the Euro had to follow a generalized set of rules about how much money they could print, and publish how much the country was earning.

Where did the problem start?
The idea of the Euro seems extremely smart up to this point, but there were flaws in the plan. Countries like Greece, who were not financially stable at the time they joined the Euro in 2001, were now able to borrow at the same interest as countries like Germany. This is because banks believed that the more powerful Eurozone countries would be able to pay back those who could not afford to return their loan This meant that Greece could borrow money without the means to pay off their debts... that is exactly what happened.

What does this mean for Greece?
Greece has had to seek bailouts multiple times at this point, but now, they are stuck in a rut. The Greek public voted in a referendum 5th July to decide whether they needed another bailout, or an immediate solution to their problems. At this point, around 60% voted 'no', meaning that they could be the first country to drop out of the Euro, and that they wouldn't accept the IMF (International Monetary Fund) conditions for a bailout extension. In a country where at least 25% of the people are unemployed, and there is not enough cash in the banks, tensions are high. For businesses, this means that they can't survive, as they don't have the cash to cover daily expenses. For the public, it means that they can't afford to pay for enough food for their families, or cover rent. Tourists have been advised to avoid Greece, as they do not have enough money in the tourism industry to survive. With tourism being scrapped in the country, Greece's main summer income stream is running dry.

What about others with the Euro?
For the other countries with the Euro, this means that they might have to loan Greece more money, or ask them to leave the Euro. Right now, the European Union (EU) is looking to see what they can do to help Greece without compromising other countries' stability.

If you want to learn more...
These videos are extremely informative, and were used as references for this article.
Bloomberg Business made a video a year ago detailing the overall European Debt Crisis.
John Green posted a video a few days ago describing the Greek Financial Crisis in detail.