?The health and future of the euro and Greece are currently being discussed in economic circles. Greece represents the first of what could be many European companies' fate, as national economies that need to be bailed out. Part of the concern shared by the European community is that failure by the Greek economy will lead to a financial panic and possible runs on the bank, with other European countries following Greece's example.
This situation did not happen overnight. Greece lived beyond its means for years building up debt that became increasingly difficult to pay back. The current Greek economic crisis that began in 2009 shines a light on the viability of the continued use of the euro and the health of the European market.
Propped up by bailouts, Greece was forced to accept austerity measures in order to obtain the much-needed financial support offered by wealthier European benefactors. The painful requirements imposed on Greece were designed to cut the deficit and restore economic stability. Amid violent demonstrations, high unemployment and salary cuts, the Parliament passed added austerity demands by a narrow margin.
One major fear voiced by economists is that Greece will stop using the euro, returning to its own national currency instead. Such a move has been likened to the Lehman Brothers financial collapse which jumpstarted a global financial crisis that resulted in a serious U.S. and European recession. In anticipation of a possible euro failure, borrowing costs have risen causing even bigger problems. The tax increases and spending cuts required to gain control over runaway deficits only serves to deepen the impact of the financial challenge causing recessionary conditions.
