for over two weeks in August 2004 11 000 athletes from across the globe descended upon Athens Greece to participate in the most competitive multi-sport event in the world the Summer Olympics the Summer Olympics cost Greece a hefty sum more than 9 billion euros but the games were a resounding success Jacques Rogue then president of the international Olympic Committee would say that Athens 2004 were Unforgettable dream games then one year later the European commission would Place Greece's public finances under strict monitoring this was the first sign of Greece's debt problems from 2010 to 2018 Greece would receive three bailouts from the European Union and the international monetary fund without these bailouts Greece would have defaulted on its loans to creditors placing its position within the European monetary Union as well as its ability to access finances from public markets in severe Jeopardy but how did Greece generally seen as an advanced economy by economists go from hosting the dream games in 2004 to fighting off creditors from most of the 2010s in 1999 11 European Union countries adopted the Euro as their National currency while Greece wanted to adopt the Euro it could not due to the restrictions under the ma strict criteria the Maastricht criteria set out the following conditions for the adoption of the Euro first inflation must be no more than 1.5 percent higher than the average of the three member states with the lowest inflation second the government deficit must be below 3 percent and third the debt to GDP ratio must be below 60 additional conditions would be added later on Greece finally did adopt the euro in 2001 but only because it had lied about its finances this would not be the last time Greece would cook its books adopting the Euro allowed Greece to borrow heavily from public markets at low interest rates the Greek governments of the day used these borrowed funds to develop many social programs lower taxes and expand its pension system these policies were met with cheers from Greek citizens but with concern from Greek bondholders when the great financial crisis ripped through the global economy in 2008 Greece's finances were already in a sorry State its debt to GDP ratio was roughly 127 percent whereas the debt to GDP ratio of the European Union as a whole was close to 60 percent its budget deficit had also ballooned to roughly 15 percent of GDP by 2009 only slightly lower than the 18 percent of GDP posted the previous year for comparison France's budget deficit was less than six percent of its GDP and Germany's budget deficit was close to just one percent of its GDP by 2009. many analysts choose 2009 as the starting point of Greece's debt crisis a newly elected government revealed that its predecessors had been Under reporting the true budget deficit this Revelation temporarily shut out Greece from Capital markets which meant that it could no longer issue government bonds to pay off its debts if Greece didn't receive a bailout then it would be the first country in the European Union to default on its loans but why would a default be so bad when you borrow money from a bank the bank will check your credit history to determine the interest rate they will charge you if you have a history of paying back your loans on time and in full then the bank will charge you a low interest rate but if you have a history of missing loan payments or refusing to repay loans altogether then the bank will charge you a high interest rate in fact the bank may even refuse to loan you money if your credit history is really bad this is the problem that Greece faced if it defaulted on its loans to investors then it would face prohibitively High interest rates in the future or it may receive very few loans at all this would force Greece to either raise taxes to make up for the Lost revenue or lower government spending either option would severely contract the Greek economy for a very long time a Greek default would also be untenable for the rest of the monetary Union if one member of the monetary Union could default on its loans investors thought then why couldn't others in 2010 the EU and the IMF agreed to bail out Greece the IMF would give Greece 110 billion euros over the next three years while the EU would give Greece 80 billion euros in exchange Greece committed to a series of austerity measures to get its public finances under control these reforms weren't very popular among Greek citizens between 2008 and 2018 Greece's GDP contracted by roughly 25 percent by 2013 more than a quarter of Greece's labor force was unemployed however despite being unpopular future governments agreed to additional austerity measures in exchange for two more bailouts one in 2012 and another in 2018 by August of 2018 Greece received the last Euros from its third bailout program prominent EU officials marked the day as a turnaround for Greece and an end to the crisis that had plagued the Mediterranean Nation for close to a decade half a decade later economists are still trying to piece together the root causes of Greece's debt crisis when Greece adopted the euro in 2001 all its debts which had been denominated in drachmas were now denominated in Euros this shift prevented Greece from using its Central Bank to print Euros to help repay its loans while excessive money printing may have led to high inflation Greece may not have needed to keep the money printer running for very long simply the fact that Greece could repay its debts at any time it may have reassured investors that their loans would be safe Greece may have then avoided the high interest rates it was forced to pay throughout much of the crisis Greece's only options for raising money to repay its debt were issuing bonds and raising taxes when the 2008 recession spread throughout the globe many Greek citizens were left unemployed and this Shrunk the tax base that Greece could draw from to pay off its debts so Greece turned to bond investors but when Greece lied about its finances it was blocked from accessing public markets with no alternative methods to repay its debts Greece was forced to accept the bailouts or default on its loans it also didn't help that Greece had so much debt to pay off by the time of the crisis Greece had the highest debt to GDP ratio in the EU a title it still holds today now a high debt level in itself does not necessarily cause a crisis by 2008 Japan's debt to GDP ratio was roughly 138 compared to Greece's 127 percent and yet it was Greece and not Japan that had a currency crisis in 2 2008 this difference in outcomes is more complex than we can do justice to in one video but one reason that Japan has been able to maintain a high debt level while avoiding Greece's fate is because its government spent its money to make Japan more competitive in the global economy in 2008 when the world economic Forum released its annual Global competitiveness index Japan was ranked as the ninth most competitive country in the world Greece was ranked 67th Japan's competitiveness in global markets meant that the returns it received from its Investments were more than enough to repay the interest on the loans it received from bondholders bondholders rewarded Japan's sound investment strategy by charging them a low interest rate in fact when the yield on 10-year government bonds for Greece reached almost 30 percent the yield on 10-year government bonds for Japan was under one percent this was despite the fact that the debt levels in Japan were higher than the debt levels in Greece in conclusion Greece's debt crisis was the result of four many crises first there was the 2008 recession that Shrunk the revenue that Greece received from its taxes the taxation crisis second there was its inability to access Capital markets because it falsified its finances the corruption crisis third there was its inability to print Euros to help repay its loans when Taxation and government borrowing were no longer options the monetary sovereignty crisis and finally there was its wasteful government spending which did little to improve its Global competitiveness the competitiveness crisis these many crises fed on each other to produce the debt crisis that gripped Greece for nearly a decade the Greek debt crisis was unquestionably a challenging time for Greek citizens many were left jobless economic growth stalled and income inequality worsened but the crisis is also a compelling narrative from which we can draw lessons for future governments to follow for instance if Greece had invested The Borrowed funds more strategically then it may have avoided the crisis altogether alternatively if Greece had been able to print its own money the crisis may have ended sooner than the near decade it took to resolve these are just some of the lessons that policymakers have taken from Greece's debt crisis we'll leave it to you to find others