My Big Fat Greek Tragedy

April 6 by Ben Brown

One of the greatest stock market disasters of recent years took place in Greece. Actually, that’s a lie. It wasn’t just one disaster, it was two huge crashes. And it’s all part-and-parcel of the Greek debt crisis.

It’s a little like playing GTA. If the police shoot one of your wheels, it’s hard to drive. If they shoot two, it’s impossible. That’s what happened in Greece, with the first shot fired in 1999 and the second in 2008.

Between 1999 and 2012, the value of shares on the Greek stock market fell by a spectacular 92.5%. Yowzer. So what happened?

 The First Shot

Let’s flashback to 1997. Everything was going great. Athens had just won the rights to host the 2004 Olympic Games, the country had successfully entered the eurozone and everyone eagerly awaited the introduction of the euro. Expectations were huge.

Europeans began devouring Greek Yoghurt thanks to Danone’s expansion. And it’s rumored that the Greek Gods were so fired up during that wonderful period, the country barely sold any viagra at all. (So they say).

But it was all lies. Greece was falsifying public accounts to stay in the eurozone. It was a political and financial scandal that will be remembered throughout history. Greece had staged a magic money-disappearing trick and deceived the European Union. This realisation crashed the market.

Greece was basically enjoying the buffet laid out by the EU, but without paying its fair share. Greece later admitted that it wouldn’t have even qualified to join the euro if it told the truth.

Scandalous!

 The Second Shot

For many years, Greece continued to spend more money than it could afford. And financed it all through bank loans. It was maxing out its credit card.

The market began to get nervous that Greece couldn’t repay all the money it was spending, and the uncertainty spilled over into a financial crisis in 2008. The government couldn’t pay the banks back because of a brutal deficit. And the banks had no more money to lend.

Poor fucking banks, I hear you cry! But really, it was all the fault of the politicians who maxed out the country’s credit card in the first place. And no-one likes to be owed money, right?

 So, What Now?

Well, the European Union stepped in to pay the check. It bailed out Greece to the tune of £230 billion. (That’s an expensive lunch). But the bailout came with a list of strict terms and conditions. The EU effectively grabbed Greece by the balls and forced them to make huge cuts to its budget.

Greek president Alexis Tsipras fought back, especially against Angela Merkel. And it’s blossomed into one of those classic love-hate relationships (except it’s definitely more hate than love). Let’s just say Merkel won’t be retiring on a Greek island any time soon.

Although Greece is on the road to recovery, unemployment remains at 28%, which is higher than The Great Depression in the US. I suppose the good news is that Greece is expected to return to normal in three generations.

Thanks to the bailouts, the debt has been assumed by countries and not private companies or banks. That has helped avoid the risk of a fatal collapse, but it pushed the eurozone into a wobbly position. Even Italy and Portugal subsequently found themselves with a sketchy debt problem of their own.

The love-hate relationship between Merkel and Tsipras is still ongoing and the wider problems in the eurozone haven’t exactly disappeared. Rest assured, this Greek tragedy is definitely not over yet!

Written by

Ben Brown

Ben is one of our writers on the ground in London. By day he writes sensible news stories for The Huffington Post. By night, he injects fierce wit into the stock market at BUX.

All posts
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.7% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.