Senior Honors Projects, 2010-2019

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Date of Graduation

Spring 2016

Document Type


Degree Name

Bachelor of Business Administration (BBA)


Department of Economics


Stephen K. Elwood


This paper aims to compile past research on the sovereign debt crisis as well as the formation and role of monetary unions, specifically optimal currency areas. It further analyzes the causes as well as possible future consequences for Greece and the European Monetary Union (EMU). It will provide a history of how Greece reached the debt levels it did and the measures taken by the EMU over the past decade. There are multiple responsible parties for the conditions that have prevailed in Greece. These parties include the investors in Greek assets, the EMU, and the rating agencies as well as the Greek government and Greek citizens.

Investors have a responsibility to inform themselves of the economic and financial conditions of their investments; however, without the due diligence of the ratings agencies and with the corruption prevalent in the Greek economy, their job became exceedingly difficult. The European Monetary Union failed to monitor excessive deficit levels of member countries, but Greece also falsified its financials to allow for its admittance into the monetary union. The thesis further draws the connection between corruption, interest rates, and Greece’s debt accumulation. The excessive build-up of debt (that resulted in the sovereign debt crisis and collapse of the economy) was ultimately a result of the Greek government overspending to meet the standard of living expectations of Greek citizens.

The primary consequences discussed are the results of Greece’s continued membership in the monetary union versus a possible “grexit” (Greece leaving the union). The hypothetical benefits and drawbacks to both options are evaluated. The thesis concludes with my recommendation for a focus on fiscal and political unity to reduce the probability that such a crisis will occur in the future. One of the fundamental reasons for the creation of the EMU was to promote a positive relationship between admitted countries, but the crisis has strained those relationships. The only way to rebuild the monetary union is to understand what happened in the first place and implement future strategies to protect those relationships.



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