Essays on Debt Crisis in Greece - Should the IMF Lend to Rescue the Country Essay

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The paper “ Debt Crisis in Greece - Should the IMF Lend to Rescue the Country? ” is an actual example of the essay on macro & microeconomics. The debt crisis currently affecting Greece is sending economic shockwaves across Europe and other parts of the world. As D’ Anieri (2011) argues, the crisis began early last year when it emerged that Greece might fail to pay its financial obligations. Primarily, the crisis resulted due to some factors arising from the recent global financial crisis, which served to worsen the already poor monetary policies in Greece.

Low-interest rates that were prevailing prior to the crisis encouraged the Greece government to engage in extensive borrowing to finance public and pension services. However, despite this huge spending, the country could not raise enough revenue from taxes to supplement the borrowing because of massive tax evasions. Due to the effects of the global economic crisis in 2008, the deficit between government spending and revenue increased, creating fear among the lenders about the government’ s ability to repay the debts. As a result, the lenders raised interest rates in a bid to cushion themselves against risks of default.

This made it hard for Greece to repay the obligations amid dwindling tax revenues. As a member state of the Eurozone, the country was not in a position to develop and implement monetary policies to address the situation. As a result, the crisis spread to other Eurozone states through associated series of defaults (D’ Anieri 2011). The majority of banks in the zone, which were the primary lenders to Greece, could also not pay their debts. Speculation in the zone about the ability of other nations (for example, the Republic of Ireland) in similar situations to pay their financial obligations also worsened the consequences in Europe.

To other parts of the world, the consequences of the crisis are being felt in the stock markets and banking sector, which have been registering poor performance throughout the year. Against this nature and consequences of the crisis, the International Monetary Fund (IMF) should step in to provide financial assistance to help the situation.

References

BBC 2011, Greece’s debt crisis odyssey, News business, viewed 2 October 2011,

D’Anieri, P 2011, International politics: power and purpose in global affairs, 2nd edn, Cengage Learning, Florence, KY.

IMF executive board approves an €26 billion extended agreement for Portugal 2011, International Monetary Fund (IMF), viewed 2 October 2011,

Kakissis, J 2011, One year after the bailout, Greece is still hurting, Time world, viewed 2 October 2011,

Mattich, A 2011, Choice for EU: bail out Greece or bail your banks, The Wall Street Journal, viewed 2 October 2011,

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