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By - Thursday 29 April 2010

It is useful to remember that the grass is not always 'greener on the other side' and if anybody was of the belief that the UK has borne the brunt of the global economic crisis, then it may be time to spare a thought for our European neighbours in Greece.

Serious government overspending and a failure to reform the economy after joining the eurozone left the destination ill-equipped to cope with the financial crisis.

Last year, the governmental debt was larger than the economy and forecasts predict that this year will not be much better.

Making matters worse for the country, Greece is in breach of eurozone rules - which state that member countries must maintain a shortfall below three per cent of their GDP - with its 12.7 per cent deficit, something which must be addressed by 2012.

Greece is now faced with a number of options to reduce its mountain of debt.

The first scenario involves a successful bail-out from other eurozone nations, which is in a discussion stage.

Secondly, Greece can set about restructuring its debts, but this would involve creditors accepting less than they were owed and would be a long, drawn-out process.

The third option facing the country is to take a temporary hiatus from the euro - essentially devaluing its currency to bring back economic competitiveness.

Finally, tax reforms could be adopted to raise the necessary capital.

What has this meant for the property market in Greece?

Ultimately, the crisis has led to real estate values in the country plummeting and a number of investors losing confidence in the market amid growing uncertainty.

The Bank of Greece has reported that the net capital inflow from abroad for property purchasing in the country was down 48.1 per cent in the first two months of 2010, compared to the previous year.

However, a number of property agents in the country are hoping that the economic woes can benefit the industry, with investors gambling on the weakening euro and emergence of distressed property in the region.

In addition, a sudden rush of property investors attempting to cut their losses and 'get out' of the country could bring with it the opportunity to purchase cheap real estate.

Whatever the outcome of the economic crisis in Greece, the process of recovery is likely to be a long one, with the effects felt throughout the European Union.ADNFCR-3415-ID-19748081-ADNFCR

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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