The paper “ The Greek Debt Crisis - Some Underlying Factors” is a fascinating variant of the term paper on macro & microeconomics. The economic crisis in Greece has attracted worldwide concern and posed a serious threat to the stability of the unified European economic system. While the ultimate cause of the Greek crisis must certainly be identified as its own apparently unsound fiscal management and the effects of the worldwide economic crisis that began in 2008, a number of other potentially aggravating factors have been identified. First, the terms of the Maastricht Agreement that established the basic framework of the European economic union has apparently contributed some obstacles, particularly in the conditions set for interest rates.
Second, the effect of the trade-in Credit Default Swaps, and more specifically, the volatility of the pricing of those debt-insuring instruments have been blamed for making the Greek crisis worse and hampering the country’ s ability to initiate recovery efforts. And finally, the credit ratings assigned to Greece’ s sovereign debt by the major credit rating agencies – ratings which are now uniformly unfavorable – have been blamed for both manipulated the financial markets before the collapse of the Greek economy, and for sabotaging Greece’ s and the EU’ s efforts to respond to and recover from the crisis.
This report briefly examines each of these three factors that potentially have impacted the Greek economic crisis in an effort to determine whether or not the assessments of their effects from economic analysts and market observers are correct. 2. The Maastricht AgreementThe Maastricht Agreement, or Maastricht Treaty, was signed in 1992 and was not so much a new treaty among the European nations as it was a consolidation of earlier treaties, principally the Treaty of Rome that had first established the European Economic Community, and the Single European Act which had amended the Rome treaty by setting the objectives of greater European cooperation and a single currency.
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