1. A passage that was interesting to me was that hardly anyone in Greece is punished for not paying their taxes. On top of that, I was surprised to learn the amount of corruption in Greece. The author states "People who go to public health clinics assume that they will need to bribe doctors in order to actually be taken care of." He also states that government ministers in public office usually emerge as multi-millionaires will several homes. No wonder the Greek economy is in the state its in!
2. Even though Greece's economy is very small compared to the other European Union economies, the economic problems that exist in Greece threaten the rest of Europe. This is because when Greece's credit ratings fell, it turned government bonds into junk. The IMF and the European Central Bank decided to lend Greece up to $145 billion dollars to make up for it, therefore making Greece a 'ward' of the other states. Also, Greece uses the Euro. Because of the financial state in Greece, the Euro will depreciate, as will investment in the Euro, therefore harming the other countries in the European Union. If Greece walks away from it's nearly $400 billion debt, then the other countries in the Union that are teetering on the edge of bankruptcy run the risk of following.
3. Greece has agreed to an austerity program offered by the EU as a sort of bailout. Austerity is a policy that refers to a policy of deficit cutting by lowering spending. Using the short-run national income model (GDP=G+I+C+NX), I will explain how this will end up contracting the European economy.
GDP=G+I+C+NX
If government spending decreases then it will result in a decrease in GDP. If taxes increase, then consumption in turn will decrease because people will have less money to spend. This will then lead to a decrease in GDP, and effect the other parts of the equation (Investment and Net Exports).
http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010
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