Greece is a low-production economy. It exports foodstuffs and imports tourists. Its GDP per capita is about 22000 dollars. The equivalent figure for Germany is 46000 dollars, for the UK 42000 dollars.
Nonetheless, when the currency across most European member states was merged under the Euro, the Greek Government, decided that they wanted Western European standards of welfare and pensions etc. (after all, they still earned the same Euros). They proceeded to spend money that they were not earning.
This went un-noticed (or at least ignored) when credit was widely available and cheap. Then came the credit crunch of 2008-2009.
Credit dried up for everyone, but Greece was still spending much more than it was earning. (And actually, still is!)
Restrictions had to be placed on pensions, welfare, unemployment support. Tax had to go up. Austerity had arrived
Last year, one political party, stood for election on a platform of "No more austerity" and won.
Negotiations about repayment of borrowings by Greece have just failed. So, not only have they defaulted on the payment but no-one will now lend them any more.
There is a referendum this weekend, which is really just a trick by the current government to gain support in further negotiations.
I suspect that Greece will have to leave the common currency, so that their currency can rise and fall to reflect their actual "real" earnings. Their currency will undoubtedly fall, a lot, making imports very expensive.
Greece imports more than 50% of its food.
Whatever happens, the Greeks are in for a poverty-stricken few years.
