The most valued part in a country is the economy. There are several reasons that can portray an economy as stable or as unstable. It is the economic state of a country that gives it an influential position globally (Hubpages 2011). At some point in time, an economy may be in crisis due to many reasons. This is said to be in place when the financial institutions are cautious about their lending habits due to failure by some debtors to pay back in due course.
The defaulting of loans affects the lending habits of banks and other financial institutions. In the state of a crisis, financial institutions tend to either charge enough interest on loans or pay too much for the securitized loan. This situation also forces the financial institutions to charge teaser rates on loans. This situation does not only affect the defaulters but also other borrowers. This is because this situation slows down the economy making it harder for other borrowers to pay loans (Hubpages 2011).
To meet their financial requirements, states usually get borrowings from global financial institutions such as IMF or the World Bank. When a state fails to repay these loans in due time, the institutions may incur losses. At this point a country may be said to be in credit crisis. In such a situation the country usually attracts fewer global investors as they sense loss in their investments (Hubpages 2011).
There are several reasons that might lead a country to default the loans by the global financial institutions. This may happen when; supply of money is outpaced by the demand for money, or when the economy of a country experiences a sudden downturn brought on by a financial crisis. Defaulting of debts might also be as a result of the instability of the currency value of a country. This makes it difficult for the currency to be used as a reliable medium of exchange. When a country is faced with big budget deficit, it is believed to be a potential trouble spot. This might even further spread to countries in the region or those that the country trade with internationally (Hubpages 2011).
Greece is a member of the European Union and regarded as one with major or influential economies in the world. Greece does not possess a huge economy but it has interconnectedness with the global financial system. Therefore the economy of Greece is one of the influential economies to the world’s economy. Greece has attracted a large number of investors in the banking industry (Hubpages 2011).
At the moment Greece is faced with a credit crisis. There are several reasons that are believed to be the cause for the economic crisis in Greece (Hubpages 2011). Greece is facing the biggest credit crisis in history. This has threatened the economic position of the country in the world economy.
The greatest cause of the credit crisis in Greece is mainly due to the poor policies. The country has an expansive but highly inefficient civil service and an economy that is stifled by regulations, favoritism and...