Greece's Deficit

Greece is facing debt crisis and serious budget deficit problems. In Greece, the Eurozone finance ministers are going for another round of talk to seek a plan to bring closer the financing gap which was created by the two-year extension of Greece's bailout program.

100 billion for three eggs during hyperinflation in Zimbabwe

In year 2009, Zimbabwe was in the late stages of hyperinflation which landed Zimbabwe's currency in a dire state. If Greece does not implement any more policies or structural reforms, it may result in a repeat of history of what happened in Zimbabwe.

Hyperinflation will also cause an uncontrolled increase in the price within a short period of time which gradually leads towards the drop in the value of Greece's currency. The extensive fall in the value of Greece's currency may be serious until it destroys the currency's function as the medium of exchange. In 2009, the value of Zimbabwe's currency cut by half against US Dollars every few days. It is a very serious matter as the economy would be in a serious recession and the purchasing power of the nation will be near to zero.

Moreover, following the matter of value drop in Greece's currency, foreign investors will lose hope in Greece's economy and may draw back the investment or stop investing which will push Greece's economy into a deeper recession. It will cause a negative growth of Greece's economy.

However, the Eurogroup would be discussing on the ways how to restore Greek debt sustainability by 2020 to restore faith of the investors in this single currency.

Personally, the budget deficit may occur due to poor policies and planning. If the value of Greece's currency continue to fall, it may result in the suffering of the country's nation. They would have problems purchasing products due to the hyperinflation because of budget deficit. Besides that, the government could improvise their fiscal policies. However, the Eurogroup and finance ministers are doing their best to help Greece in financing and bail-out which would hopefully bring a happier ending for Greece. The consequences will be dire if the debt deficits are left unsettled for a longer period.

Reference: http://online.wsj.com/article/SB10001424052970204002304576626430653206132.html

Written by Xue Ying