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The Financial Crisis in Greece

Posted on in Bankruptcy Attorney
The Financial Crisis in Greece

In the midst of its financial crisis, Greece has requested its third international bailout to help pay off its debts and to prevent economic collapse and ejection from the euro. The third requested bailout would serve as a new rescue package for a term of three years. During this time, Greece would promise to introduce its new economic reforms in exchange for money. Greece is also seeking debt relief from its earlier bailouts.

Previous Bailouts

Greece has already receive two massive bailouts of approximately 240 billion euros, equivalent to $265 million. The latest bailout ended last week, followed by the struggling nation missing a large debt payment to the International Monetary Fund. Greece is the first developed economy to default the International Monetary Fund.

This Sunday, the European Union will decide whether to grant another bailout program for Greece. The decision to grant or deny the third bailout request is pending the European Union's receipt of more details about Greece's future economic plans. The International Monetary Fund estimated that Greece will need at least 50 billion euros, or about $55 billion. However, financial analysts now say the amount needed will be much higher because the International Monetary Fund conducted its analysis before the Greek banks were forced to shut down.

The European Central Bank

The European Central Bank rejected Greece's request to provide more emergency funding for its banks. The Bank has also made it harder for Greece to access its existing funding by applying a bigger discount to assets that are offered as collateral. The European Central Bank is the central banker for the European Union. The 19 countries that use the euro agree to abide by the Bank's rules on things such as the flow of money and bank regulation.

How Did This Happen?

The state of Greece's economy is attributable to years of overspending and mismanagement of money in the country. Their economy has nearly run out of cash. As a result, the federal government has run out of money, banks have been closed for over a week, and cash withdrawals have been capped for individuals and businesses. The daily limit on cash withdrawals from ATMs is 60 euros. People have even stopped driving their vehicles in order to conserve cash.

What Could Happen?

As a result of this financial crisis, Greece could be forced to print its own currency and eject the euro if European Union leaders cannot agree on a new rescue package. Ejection from the euro would be unprecedented as its members join the European Union under the expectation that they will never leave. It has been difficult for European leaders to work with Greece as they have been engaging in prolonged negotiations for months. Creditor nations, such as Germany, do not want to give Greece more money without the promise that it will create a more stable economy.

This Sunday's summit, which will consist of the 28 leaders of all of the European Union countries, will decide the fate of Greece in the European Union. This summit has come with the forewarning that any granted bailout deal could come with stricter requirements than the previous deal that Greece rejected.

Are You in the Midst of a Financial Crisis?

If you are contemplating bankruptcy, it is important that you seek legal support to assess your financial situation and discuss your legal options. At the Law Offices of Newland & Newland, LLP, we have a team of experienced lawyers who possess the skills and expertise needed to guide you through the bankruptcy process. Contact our office today to schedule your consultation.

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