The paper "EMF, EU and Economic Recovery in Europe" is a good example of a business case study. The Greece economy suffered a severe financial crisis since 2009, following the misrepresentation of their public finance status. Being a member of the eurozone, the country had agreed to the Maastricht Treaty which stated that the annual deficit should never exceed 3% at the end of a year and the ratio of public debt to Gross Domestic Product (GDP) must not exceed 60%. At the time of realization about their financial crisis, the country’ s public debt had soared to a high of 129% and the public deficit was at 15% of the GDP.
Their credibility to follow international agreements had faltered, leading to a loss of trust from the investors and the inability to gain market access. The Eurozone area state was in a fix and had no option but to seek for help from The European Union (EU), The International Monetary Fund (IMF) and The European Central Bank (ECB), commonly referred to as the troika, becoming the first euro area country to receive such funding.
They set up a programme in May 2010 where Greece was lent 110 billion euros and in turn, had to agree to a 3-year memorandum of economic and financial policies. The program was to be closely monitored by the EU and the IMF through their quarterly reviews. This paper seeks to discuss the impact of the financial assistance to the Greece economy and the conditions tied to it and finally determine whether the international institutions are helping or hindering its process of economic recovery. The paper also seeks to understand the concept of democratic deficit and demonstrate how it relates to the economic situation in Greece. In order to best understand the situation, the essay will discuss the various conditions stipulated in the memorandum of financial and economic policies, the expectations of the troika when initiating the program and the overall outcome, after the lapse of the three years. The first round of Austerity measures, as required by the memorandum, was carried out in March 2010 followed by the tax reforms in 2010.
Policies to reduce the fiscal deficits were put in place, indirect taxes were increased and new direct taxes introduced.
Clampdowns on tax evasion were instituted, and the pension benefits of the citizens were cut down. Public sector pays were cut down, mostly affecting the health, personal social services and education sectors. The rise in the value-added tax (VAT) from 19% to 23% led to rising inflation, also contributed to by the rising prices of oils. All these measures were put in place to act as a budget consolidation mechanism, in a bid to get the country back on its own footing. During the setting up of the program, IMF projected that if the programme were to run successfully as planned, the growth of the country was to resume by 2012 and the unemployment would decrease to 14.8% the same year.
They also expected the government to be able to regain market access by 2013 and that debt restructuring would no longer be required. Three years down the line, however, none of these had been achieved, and the government had plunged into a deep recession. By 2012, unemployment had risen to over 25% and the debt ratio had risen by more than 20% to get to 149%.
Andre, S., Guntram, W. D., Sousa, C. D. & Alessio, T., 2014. The Troika and Financial assistance from EU and IMF( successes and failures), s.l.: s.n.
Dimitri, P. B., Michalis, N. & Gennaro, Z., 2014. Is Greece Heading for a Recovery?, New York: Levy Economics Institute of Brd College.
Harari, D., 2015. Greek Debt Crisis; Developments in 2015. Economic Policy and Statistics, Issue 7114, pp. 3-5.
International Monetary Fund, 2013. Greece: Ex Post Evaluation of exceptional access under the 2010 Stand By Agreement, Washington DC: Publication Services.
International Monetary Fund, 2014. 5th Review under extended arrangement under extended fund facility and request for waiver of nonobservance of perfomance criterion and rephsing access, Washington DC: Publication Services.
John, C., 1999. From Parliamentarism to Pluralism: Models of Democracy and European Union's Democratic Deficit'. Journal of Theoretical Politics, 1(11), pp. 107-135.
Majone, G., 1998. Europe's 'Democratic Deficit': The Question of Standards. European law journal, 4(1), pp. 3-5.
Mark, W., David, R. & Stephan, L., 2015. The Greek Economy: Whicha way forward?. Center for Economic and Policy Research, pp. 5-12.
Nicos, C., Chrysa, L., Manos, M. & Vassilis, M., 2011. The Greek Crisis in focus: Austerity, Recession and Paths to Recovery. Hellenic Observatory Institute, Issue 1, pp. 13-17.
Taylor, S. F., 2011. Financial Crisis in the European Union: The Cases of Greece and Ireland, Blacksburg, Virginia: s.n.