Greek economy under pressure
Shares on the Greek stock market fell by 6% today amid concerns that the country is struggling under a mountain of debt and may be unable to repay liabilities in the short term. The catalyst for the fall in the Greek stock market was the announcement by credit rating agency Fitch that it has cut the rating on Greece's debt to a ten-year low. There are concerns about the short, medium and long-term future of the Greek economy after the revelation that debt is estimated at around 125% of the country's gross domestic product.
This is a very difficult situation for the Greek economy and the Greek government because ultimately the more they struggle to raise finance and cut costs the more focus is placed upon the country's dire economic outlook. The economy is currently in a stranglehold and the government is unable to wave a magic wand and rectify what is actually a worsening situation. So what next?
At the moment the Greek government is able to use its own government debt as collateral for further borrowings from the ECB but if the situation gets any worse, even this basic backdrop may be withdrawn. At some point one of the worldwide or European financial institutions will need to step in with some kind of rescue plan.
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