By Padmini Arhant
It originated in Iceland with the pervasive subprime mortgage factor and similarly affected other economies like Ireland, Greece, Portugal and Spain, referenced as PIGS.
Although, every nation in this category share the contaminated ‘derivative’ traded internationally, the lack of deficit control with the national budget exceeding the GDP growth also contributed to the meltdown and subsequently reflected in the poor credit rating.
More prominently, Greece identified with:
“Goldman Sachs between the years 1998-2009 has been reported to systematically helped the Greek government to mask its national true debt facts.
In September 2009 though, Goldman Sachs among others, created a special Credit Default Swap (CDS) index for the cover of high-risk national debt of Greece. This led the interest-rates of Greek national bonds to a very high level, leading the Greek economy very close to bankruptcy in March 2010.”
The culmination of internal and external mismanagement primarily led the Mediterranean economy to the brink of collapse forcing it to seek bailout from the European Central Bank (ECB), EU and IMF.
European Union was challenged with a predicament in the Greece bailout to either ignore the problem or address it to avert the contagion in Europe.
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Thank you.
Padmini Arhant
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