The paper "Structure and Roles of Monetary and Fiscal Policy in the European Union" is a great example of a finance and accounting case study. The members of the European Union (EU) are witnessing excessive sovereign debts in the last 12 months which has resulted in the occurrence of the debt crisis in the region. The crisis has specifically impacted countries such as Portugal, Ireland, Italy, Greece and Spain, also known as PIIGS. The current monetary and fiscal policies of the EU clearly allocate the duty to keep the financial situation of a country stable to the policymakers of that particular country.
However, the present debt crisis in Greece has exposed the gap areas in the policy and therefore the paper discusses the structure and roles of monetary and fiscal policy in the EU in dealing with the debt crisis. Experts consider that the bailout of Greece by the EU as a turning point in the integration of the European region, which is discussed in detail in this paper. The current debt crisis in Greece had exposed the issues and problems in the present monetary and financial policy of the EU.
This policy does not make it mandatory for the governments to work in a cohesive manner and adopt a singular economic strategy in the eurozone. Also, in case of breaking of rules by a particular country, penalties are not imposed on that country. Further, the policy does not allow bailing out of a country during its financial crisis through stimulus packages. Thus, developed economies in the EU are not liable nor can voluntarily help lesser-developed EU nations financially during crisis times.
This absence of financial support between the EU nations has also resulted in lesser developed countries adopting corrupt methods such as hiding the real growth figures. These countries are also employing cost-cutting means such as reducing consumption and employment to control their debts and deficits. Working around these caveats, the EU decided that the ECB would buy the sovereign bonds from the country. Further, the ECB decided to reduce the refinancing rate by around 325 basis points to create price stabilisation. It also fixed the tender rates and provided full allotments to such projects.
Also, the ECB provided the refinancing option through short term maturities of around one to three months as well as longer maturities of six months to a year. It lowered the country’ s rating to BBB- and allowed Greece to accept some selected foreign currencies as well.
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