The paper "Greece Economic Crisis" is a good example of a macro and microeconomics case study. After the financial crisis, there have been cases of governments defaulting on their debts. This is due to the fact that the financial crisis leads to economic turndowns, low revenues, and widening deficits in governments. The Greece public debt problem became a major crisis in 2010. The crisis escalated to the point in which it threatened the survival of the Euro (Lane, 2012). The Eurozone members and the International Monetary Fund (IMF) had to come in and help Greece from the crisis.
This included a bailout plan of $145 billion as a financial package. The main aim was to ensure that the Greece crisis did not affect other European countries such as Spain, Portugal, Ireland, and Italy. An additional bailout was announced in May 2010 of $636 billion. This is financial assistance that was meant to be given to the most venerable EU countries (Mitsopoulos & Pelagidis, 2011). The Greece debt crisis has led to a lot of questions and prospects for the future of European monetary integration.
There have been suggestions that Greece should leave the Euro and come up with its own currency. The issue of the bailout for Greece has also led to a lot of debate (Vasilopoulou, Halikiopoulou & Exadaktylos, 2014). This essay analyses whether the rest of the European (EU) should help in bailing Greece out of the economic woes. The essay also discusses whether Greece should have changed its domestic economic policies in response to demands from the EU. Need to bail out Greece The Greece government asked for financial assistance in April 2010.
The agreement to assist Greece was finalized in May 2010 where 110 billion pound debt was to be given over a three year period. At that period, there were no formal mechanisms to provide financial support. This led to the need for the Euro members to offer bilateral loans to Greece which amounted to 80 billion pounds. The disbursement for the loans was carried out through the European Commission. IMF was able to provide the rest 30 billion pounds through standby agreement (Rady, 2012). The need to bail out Greece has been met with resistance and controversies.
Countries such as Germany faced a lot of resistance home when supporting the Greece bailout. Despite this, the bailout has been the most reasonable step by the EU. The Greece bailout is important to ensure that the sovereign debt does not spread to other European countries (Lane, 2012). This is due to the fact that the euro system is flawed in design and dismal failure in one part leads to a widening crisis in the whole region. Greece is not an isolated case crisis as it affects the whole of the Eurozone.
This is why it is important for the rest of the EU to join hands in bailing out the EU. The Greece economy is in free-fall and the consequences will be felt widely (Matsaganis & Leventi, 2011). The excessive debt problem faced by Greece was unbearable hence the need for the EU to bail them out. Most of the Greece debt was owed to banks outside the country. The largest amount was in France and Germany who would have suffered most if the country defaulted.
The bailout by EU members was the only means in which Greece would avoid default. Most of the money received from the bailout was used in paying French and German banks (Matsaganis & Leventi, 2011). It is important to note that the bailout plan included the drastic reforms which would help in closing the deficit. Through the reforms, it was assumed that the new lending would be manageable. If the reforms that were attached to the lending were implemented, it would have been possible to cut the deficits substantially (Mitsopoulos & Pelagidis, 2011).
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