Greek Debt Crisis Analysis
Aarushi Mehra
The Fiscal deficit Of Greece
4.1 THE GREEK DEBT CRISIS: MACROECONOMIC POLICY
Macroeconomic policies are explanation to preventing solvency crises in a currency union.
The Greek debt crisis occurred in 2009, after the Great Recession: Large government deficits and accumulated debt caused a fiscal crisis that later resulted in bailout packages from the European Central Bank (ECB), the International Monetary Fund (IMF), and the European Commission (EC).
When the crisis hit Europe in 2009, the markets were in shock and heavy interest rates were imposed which made it difficult for the debt countries to repay their debts.
Large imbalance countries were mostly affected. In the European Union (EU), the pile up of imbalances made the
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Since exporters depend more on external financing than non-exporters, devaluation in a poor financially developed country actually depress the economy. The devaluation in Argentina in 2002 coincided with a commodity boom that increased export profits. The devaluation in Mexico in 1994, Mexico was bailed out by the United States and the IMF. Those actions along with the devaluation helped Mexico’s economy recover. However other devaluation events weren’t as successful, and some of them were even contradictory. Therefore, whether devaluation could drive the country out of the current crisis remains …show more content…
Fiscal consolidation, including privatization. It’s the default policy choice. Fiscal consolidation is good but the question is whether it is sustainable or not in near future .there is large mismatch between revenues and expenditure at the level of the government and at household level which leads to public debt. Fiscal consolidation will however impose social costs. Hence further bailouts along with fiscal consolidation may only worsen the crisis but not deal with the uncertainty prevailing in the euro zone
2. Other option is to go for building an institutional framework i.e. a future roadmap between a few strong economies and other weaker economies to promote closer fiscal union .A large European budget with limited fiscal transfers from rich to poor countries as it doesn’t leads to takeover of sick and ailing public sector units.
3. Third option is the radical one, leaving the euro zone, but if that would happen, it’ll lead to insolvency of several EZ countries, a breakdown in intra zone payments and instability could spread through the financial
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