Brooklyn,
Why is Greece in so much trouble?
In recent years, Greece has been living beyond its means. , Its rising level of debt has placed a huge strain on the country's economy.
The Greek govt borrowed heavily and went on something of a spending spree due this, public spending increased and public sector wages was doubled due cool down strikes.
While this was going on, the money flowed out of the government's coffers, tax income was hit because of widespread tax evasion.
Greece's budget deficit increase [the govt spent more than its revenues from taxation. [ last year was 13.6% of its gross domestic product (GDP)].
Greece's high levels of debt means investors became wary of lending it more money and therefore, and demanded a higher premium for doing so.[This year the govt must refinance more than 50bn euros in debt..
Why is this a worry outside Greece?
Everyone in the euro zone - and anyone who trades with the euro zone - is affected because of the impact on the common European currency.
The most immediate impact is on the 15 other euro zone economies who have agreed to help out Greece. The taxpayers of these countries will effectively share a part of Greece's burden.
The impact of the crisis to other country [China for example]
THE pain of the European debt crisis is spreading as the plummeting euro makes Chinese companies less competitive in Europe, their largest market, and complicates any move to break the Chinese currency's peg to the US dollar. Uncoupling the yen would make American goods more competitive against Chinese products.
For various reasons, China has not yet put that policy into place and the euro's nosedive could make such a move even more difficult. Letting the yuan rise against the $US would also mean a further increase in the yuan's value against the euro, creating even more problems for Chinese exporters.