How do money problems in Greece affect the UK?
- 11 February 2010
- From the section Politics
It may be a popular holiday destination for Brits but Greece is facing financial difficulties as its public debt soars. EU leaders are meeting to talk about the country's problems after fears its situation could affect the rest of Europe and bring down the value of the Euro.
Why is Greece in so much trouble?
The simple reason is because Greece has been spending more than it has been raising through things like tax. Now it is struggling to repay what it has borrowed to meet the difference. One key problem is that the country has not been very good at tackling tax dodgers.
Does this have anything to do with the financial crisis?
Yes, Greece is suffering in the worse recession that Europe has faced since the 1930s. It's feared other countries like Ireland, Spain and Portugal could find themselves in a similar situation if the problem is not dealt with.
Why should the rest of Europe care if Greece goes bankrupt?
It's all about the euro. If the Greek economy crashes the world's financial markets could lose confidence in the euro. If this happens and the currency plummets it would hit the economies of other countries like Germany and France who also use the euro. The EU meeting could be about a bail out plan to stop Greece dragging everyone else down.
How does this affect people in the UK?
If all this starts causing the euro to lose value you could get more for your pound anywhere in Europe that used the currency. However, it could be bad for British factories that sell things to European countries, as if the pound becomes stronger it will cost European countries more to buy things from the UK. This could mean affected businesses would reduce or even cancel orders.