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Greece Eurozone Crisis: Is The Euro A Bad Idea?

14/07/2015 18:09 BST | Updated 14/07/2015 18:59 BST

The Euro debt crisis came to a head when Greece defaulted its loan payments after months of insecurity. The nation was financially sanctioned and many inhabitants lined up to gather their savings after the country slipped under the weight of its debt.

After a referendum, Greece is left with even harsher austerity measures in compliance with the Eurozone, but what exactly is the Eurozone and was it a bad idea?

The zone was established in 1999 and includes 19 countries, the members of which all adopt a single currency - the Euro. All its monetary policies are decided by the European Central Bank in Frankfurt, Germany.

euro flag

The Eurozone is made up of 19 countries

Countries in the Eurozone:

Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.

Its biggest role is to control inflation amongst member countries and this is done by attempting to keep prices stable.

Problems begin to occur when a country with a weak economy is introduced into the member states. The Central Bank tries to control this by using strict guidelines for states wanting to join. This is primarily based on the country's long-term stability forecast.

Greece's weakness

Greece's fragile economy brought a weakness to the Eurozone and the country was only accepted after a brief rise in economic status.

When it joined the Euro in the year 2000, public spending soared and low interest rates lured the government to borrow more than it could afford, landing it in a recession with tough austerity measures.

The problems in Greece have continued ever since and they currently rely on Germany to be their most generous creditor.

When claiming for credit relief, Greece was effectively up against the 18 other Eurozone countries, which made for a very lopsided negotiation.

Greece Debt Crisis Explained

But they all completed bailout programs that included intense austerity policies, so they were not about to endorse making an exception for Greece.

Spain’s government in particular was concerned that granting Greece concessions would embolden its own resurgent, left-populist Podemos party.

Slovakia and the Baltic states, which are economically comparable to or poorer than Greece, resented the idea of transferring more aid to a wealthier neighbour.

Who wanted Greece to leave the Eurozone?

While Greece struck a deal with creditors to ensure its current stay in the Eurozone, some countries didn't want to invite it back.

The countries that took a hard line included main fiscal donators Germany and Chancellor Angela Merkel said: "The most important currency has vanished with Greece - and that is trust."

Some of the other countries that wanted Greece out are Estonia, Finland, Slovakia, Netherlands, Slovenia, Latvia, Belgium and the Eurozone's newest member, Lithuania.

Dalia Grybauskaite, Lithuania's president, scathingly described the current government's attitude to reforms as "all the time mañana (tomorrow)".