How did Greece and the EU to get into this trouble in the first place? The seeds were sown back in 2001, when Greece adopted the euro as its currency. Greece has been an EU member since 1981, but the deficit of its annual budget is never low enough to meet the Maastricht criteria of the euro area.
All goes well in the early years money. As well as other euro zone countries, Greece is benefiting from the strength of the euro, which means lower interest rates and a flow of investment capital and loans.
However, in 2004, Greece announced it lied to get around the Maastricht criteria. Surprisingly, the EU imposed sanctions, no! Why not? There are three reasons.
France and Germany have also spent beyond the limit at that time. They'd be hypocritical to penalize Greece until they impose austerity measures of their own in advance.
There is uncertainty about exactly what sanctions to apply. They can expel Greece, but that would be very groundbreaking and could undermine the euro itself.
The EU wants to strengthen, not weaken, the strength of the euro in international currency markets. A strong euro will convince other EU countries, such as Britain, Denmark and Sweden, to use the euro. (Source: Bloomberg, Greece cheated, May 26, 2011; BBC News, Greece Joins Eurozone, January 1, 2001; Greece to join the Euro, June 1, 2000).
As a result, Greek debt Greece continued to rise until the crisis broke out in 2009. Currently, the EU must stand behind a member or face the consequences of either Greece leaving the euro zone, or even worse , a Greek default
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