The paper 'International Institutions Help or Hindrance to Economic Recovery in Greece" is a perfect example of a finance and accounting case study. Globalization has helped in generation of unprecedented stages of financial risk and growth. In this case, financial markets opened up allowing firms and governments to invest freely. However, due to growth in global finance, it grew into being complex. Domestic regulators struggled hard to pace in which financial practices were evolving. As a result, international cooperation assumed the patchwork with limited coercive and scope. The international monetary fund and EU agreed on initial steps to enable international regulations, as well as, liquidity support.
However, these regulating bodies effectiveness has been questionable. Greece economic crisis and debts have left it with no choice by to plan to exit the eurozone posing many questions on its imminence (Abbasid, & Insert, 2012). On the other hand, the international monetary fund has continued demanding that Greece adhere to the terms of its earlier bailout and implement economic reforms as a prerequisite for additional aid. The action of these bodies has raised democratic deficit concerns.
This is a concept that is principally invoked in the argument that the EU and other organizations do not portray forms of democracy and seem remote to the ordinary citizen due to their sophisticated method of operation (Taylor, & Taylor, 2006). The aim of this paper is to deduce whether international institutions such as the International Monetary Fund (IMF) and the European Union (EU) are helping Greece economic recovery basing argument in democratic deficit context. Crises Overview Greece had rapid economic growth between 2000 and 2009 where their actual GDP average was 4% against the euro, however, the sources that generated this growth were from unsustainable drivers.
The large real wage increase, low-interest rates, and increased credit growth boosted private consumption as well as public spending. The country failed to invest in projects that had the ability to pay off in future but used it to cover current consumption. The pension and health system become financially unsustainable in the long run and tax evasions that significantly affected the government revenue (Ait-Shelia, Andritzky, Jobst, Nowak, & Tamirisa, 2012). There have been optimistic projections and consistent overspending in Greece leading the country to miss its fiscal targets.
All these factors together with economic imbalances and uncompetitive economy Greece has remained vulnerable to the global credit crisis. IMF and EU Efforts As far as the international monetary funds and the European Union have made several is seen as a stabling block towards Greece economic recovery. Some of these efforts include the following; The Eurozone committed a total of € 80 billion in loans to Greece while IMF offered € 30 billion in a three-year stand-by agreement. This short term loan was aimed at boosting, restoring confidence and maintaining Greece financial stability (European Commission, 2012).
In addition, economic growth and improved competitiveness were also prime goals to be met within the medium term. In 2011, another bailout need arose which were announced in 2012. This program goal was aimed at focusing more on growth enhancement reforms. In this bailout, the autonomous debt holders had to recognize losses on their bonds (Eriksen, & Fossum, 2000). As a result, this affected the banks in Greece, which held roughly € 32 billion in government bonds.
Abbassi, P. & Linzert, T., 2012. The effectiveness of monetary policy in steering moneymarket rates during the financial crisis. Journal of Macroeconomics 34 (2012) 945.
Ait-Sahalia, Y., Andritzky , J., Jobst, A., Nowak, S., & Tamirisa, N., 2012. Marketresponse to policy initiatives during the global financial crisis. Journal of International Economics 87(1), 162-177.
Bekkers, V. J. J. M. 2007. Governance and the democratic deficit assessing the democratic legitimacy of governance practices. Aldershot, England, Ashgate Pub.
Brealey, R. and Kaplanis, E. 2004 “The impact of IMF programs on asset values” Journal of International Money and Finance, 23 pp.253-270.
Campbell, J.Y., Lo, A.W, MacKinley, A.C. 1997. The econometrics of financial markets. New Jersey: Princeton University Press.
Eriksen, E. O., & Fossum, J. E. 2000. Democracy in the European Union integration through deliberation? London, Routledge.
European Commission, Directorate-General for Economic and Financial Affairs, 2010 “The economic adjustment programme for Greece”. European Economy, Occastional Papers 61
European Commission, Directorate-General for Economic and Financial Affairs, 2012“The second economic adjustment programme for Greece”. European Economy,Occastional Papers 94
Featherstone, K. 2011. “The Greek sovereign debt crisis and EMU: A failing state in a skewed regime”. Journal of Common Market Studies,49 pp.193-217.
IMF, 2012. IMF Executive Board Approves €28 Billion Arrangement Under Extended Fund Facility for Greece. Press release no. 12/85. March 12, 2012.
IMF, 2012. IMF Reaches Staff-level Agreement with Greece on €30 Billion Stand-By Arrangement. Press release no. 10/176. May 2, 2010
Taylor, R. J., & Taylor, L. E. 2006. Democratic deficit. [Waterloo, ON], R/L Taylor.
Ward, D. 2002. The European Union democratic deficit and the public sphere an evaluation of EU media policy. Amsterdam, IOS Press.