...(IMF), commonly referred to as the ‘troika’, in May 2010 (Gemenis & Nezi 2015; Tseronis 2014). Afterwards, Greece required a second bailout programme in February 2012 and an agreement that led to a third bailout after marathon negotiations, on 13th July 2015. The aim of this essay is not only to describe and analyse how Greece reached a third bailout but also to investigate if this programme could be the end of the Greek and euro crisis. It is divided into three main sectors: the first one is about the previous bailout programmes as well as the reasons for their failure. The second one analyses the present crisis, the new bailout framework and its current effects in Greece. The last one illustrates the future for both Greece and the Eurozone, provided that the programme is implemented by the Greek government, and the dangers, which still exist, of torpedoing this new programme. Although the new bailout comprises immensely tough austerity measures, it...
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...aftermath of World War II, economic devastation was evident throughout much of Europe. Vast amounts of resources, infrastructure, and financial ability had been destroyed in the nearly decade-long conflict. Due to the obvious disunity that European nations shared, an idea was created out of the ashes of the largely European conflict: The European Union. In 1958, after attempting to create several different organizations to unite Europe (The European Coal and Steel Community, the European Economic Community, etc...) the European Union was organized. The objective of the European Union is both economical and political. The six original founding members (Belgium, France, West Germany, Italy, Luxembourg, and The Netherlands) envisioned an organization of such economic unity, that the threat of another continental war would be nearly impossible to instigate in Europe again. As members of the European Union grew, an idea was formed to enhance the economic cohesiveness of the many member nations. In 1992 the Maastrict Treaty was established to create a universal currency for members of the European Union who wanted to participate (cited in Lynn, 2012, p. 25). Those nations that joined this Eurozone can be seen in Figure 1 as indicated by their blue color. Figure 1 Members who abandoned their national currency in favor of the new "Euro" currency became known as members of the "Eurozone" (Ashton, 2012). By linking a single currency to multiple economic engines, the Euro quickly...
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...Greece – Crisis and Solutions Paper International Economics Greece - Crisis and Solutions June 25, 2013 Content 1. Introduction………………………………………………………………………………………………………2 2. Greece joining the Eurozone…...............................................................................3 3. Budget structure that lead to the crisis…………………………………………………………………6 4. Supporting and rescue measures…………………………………………………………………………9 5. Conclusion……………………………………………………………………………………………………….11 6. References……………………………………………............................................................13 1 1. Introduction In the last years the severe debt crisis of Greece has posed a large challenge to the member states of the Eurozone. It is threatening the stability of the European Monetary Union (EMU). After having piled up over 300 Billion Euros of debt, in 2010 the market mistrust in Greece dramatically increased, especially as the newly elected government revealed the incorrectness of the financial statistics of previous years. Finally, on the 23rd of April 2010, Greece was threatened by national bankruptcy and requested help of the other Eurozone members and the International Monetary Fund. Although Greece is one of the smaller economies of the Eurozone, its daring default has great effects on the whole community. Now then, what happen if Greece “Grexit”? The Pros are that a return to the old currency like the Drachma would have the effect of depreciate in value, it would become more competitively in...
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...to member countries which are either developing countries that are in extreme poverty or countries that are faced with severe economic crisis who are no longer able to seek financing from other sources. Along with these loans, training and technical assistance on bettering economic management is offered. The IMF also provides policy advice to governments and central banks based on analysis of economic trends and cross-country experiences as well as research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets. (About the IMF, n.d.) Currently there are 188 member countries of the IMF which makes the organization extremely important to virtually the whole world. Upon its creation at the Bretton Woods Conference there were 29 member countries who signed the Articles of Agreement in 1945. Between its creation and present day the IMF has helped countries deal with economic crises, and funded growth for many poverty stricken countries. As the IMF has grown into a major global economic body the role of the IMF has shifted from its first purpose of ensuring currency exchange rate stabilization and overseeing of the international monetary system to a major global lending organization and global economic stabilization force. (About IMF, n.d.) “Two years ago the world’s main international economic institution [the IMF] was heading for irrelevance, its homilies ignored by rich countries, its advice despised in poorer ones...
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...is resisting subsidies. Athens is trying to reassure its EU partners with a plan that includes tax hikes and sharp cutbacks in the country's enormous public sector. Nearly 1 in 10 Greeks is employed by the government as a civil servant; that's almost 1 million people. But Papandreou's pledge to trim that number has already triggered protests. Civil servants are planning nationwide strikes this month. People have a hard time believing that we're actually going to do what we say we are going to do. - Greek Finance Minister George Papaconstantinou The government also has drawn criticism from university students who now doubt that there will be enough jobs for them. Angry posters fill the walls of the entry hall at Athens University's economics department. Students there are skeptical that the government will be able to jump-start Greece's economy. Valia...
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...According Balassa (1962) there are five stages of economic integration: the free trade area, the customs union, the common market, the economic junction and the complete economic integration. The European Union is on the penultimate stage, which is the economic union. The objective of this essay is to know more about the European monetary union and other touch points that are to be the EMU, the process, countries belonging to the European Union but not part of the EMU and its reasons. Economic union is a common market that removes restrictions on trade between countries. The currency is the same and a central authority controls fiscal policies. It has a single currency and monetary policy. The objective of this stage is that members actually are formed as one nation and its features are a common fiscal common currency, harmonized tax rates, the pooling of foreign exchange reserves, and monetary policy. (Cerdeira, 2009) The EMU is a major step in the integration of the economy of the European Union. It involves the coordination of economic and fiscal policy of the same coin policies, some countries took the next step to the next stage and adopted the euro as its currency, and these countries are part of the euro area. (EC, 2014) " One Market, One Currency " is what the European Commission defined as a geographical area where the economy is a single currency and where risks can be managed and has flexibility among country. This would make cuts of a country being adversely...
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...II. Greece public debt 1. Current situation Greece has been in the public debt crisis since 2009. The Greek public debt crisis is one of a number of current European sovereign-debt crises and is believed to have been caused by a combination of structural weaknesses of the Greek economy coupled with the incomplete economic, tax and banking unification of the European Monetary Union. Those days, Greece has confronted with three main related problems: government trust crisis, declining liquidity capacity and high risk of bankruptcy. a) Government trust crisis The prestige of Greek government was impaired seriously during crisis time. Greece borrowed uncontrollable amounts from the financial market to ensure the liquidity for the budget deficit. The budget deficit limit allowed in Eurozone was only 3% of the GDP, while this level of Greece in 2009 was 13.6% and might even increase to over 14%. To cover the overspending in the past years, the Greek government had reported data inconsistently and bias, containing various unusual sections in budget. This action drew to the negative consequences on the reputation of the Greek government on the domestic as well as international market. The credit ascertaining organization successively downgraded Greece recently. Within the first four months of 2010 S&P had lowered continuously the credibility coefficient of Greece, from A- to BBB+ and BB+. b) Declining liquidity capacity Unpaid debt of Greece was nearly 400 billion...
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...Money, Banking & Risk Assignment Jacques Delors said ‘’The Euro was flawed from the beginning’’ and that there was also ‘’Too little, too late done’’ (The Telegraph, 2011), from the European leaders in order to prevent the huge economic crisis within the Euro. Plans for a single European currency began in 1969 with the Barre Report, which was issued by then the only 6 countries in the European Union, but back then it was called the European Economic Community or the EEC. ‘’ In 1979 the European Monetary System (EMS) was established to link European currencies and prevent large fluctuations between their respective values. It created the European Exchange Rate Mechanism (ERM) under which the exchange rates of each member stat’s currencies was to be restricted to narrow fluctuations (+/-2.25%) on either side of a reference value’’ (eu4journalists, 2011). On January 1st 1999 the Euro was adopted in its non-physical form with exchange rates, more like a virtual form of payments for foreign exchange and electronic payments. It was adopted by then 11 of the 15 member states in the euro, Greece joined in 2000 as it did not meet the economic criteria until then. 3 years later on the 1st January 2002 the new currency was brought in properly with coins and notes being printed. In order to receive this currency each member state had to have the right criteria. These criteria where known as the convergence criteria and they did not allow a country to adopt the Euro as a currency...
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...reference to greece) the euro-zone ‘The Eurozone’ is the nickname commonly used to describe the member states that use the EU’s single currency, the Euro. The idea of creating a single currency for the European Community was first mentioned in the 1970 Werner report, which led to the establishing of the European Monetary System (EMS), the forerunner of the Economic and Monetary Union (EMU). The Maastricht Treaty (1992) made EMU a part of EU law and set out a plan to introduce the single currency (the Euro) by 1999. The Maastricht Treaty also established certain budgetary and monetary rules for countries wishing to join the EMU (known as the convergence criteria). In 1998, 11 member states (Germany, France, Italy, Belgium, Luxembourg, the Netherlands, Spain, Portugal, Ireland, Austria and Finland) undertook the final stage of EMU when they adopted a single exchange rate, which was set by the European Central Bank (Britain, Sweden and Denmark negotiated an opt-out from this final states of EMU). The new Euro notes and coins were launched on 1 January 2002. There are currently 16 EU states in the Eurozone. Greece joined the initial 11 members in 2001, Slovenia joined in 2007, Cyprus and Malta in 2008, and Slovakia joined in 2009. Estonia is due to join the Eurozone in 2011. All future members of the EU must adopt the Euro when they fulfil the convergence criteria. Economic and Monetary Union (EMU) Step 1: a country loses a degree of economic sovereignty when it enters a trade bloc...
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...E Pluribus Unum?: A Macro Economic Analysis of the Rise and Fall of Euro Zone Currency Journalist Alen Mattich wrote in the 17 September 2010 edition of Wall Street Journal regarding the economic conundrum facing the Euro Zone with the imminent default of Greece on their national debt. His article, entitled “Trust Greece…to Default,” outlines the failing monetary policy of the Greek government and the quazi-demands for a national bailout made by Finance Minister George Papaconstantinou. If the Greek economy collapses absent perpetuated bailout from other powers, the European universal currency will collapse. The intrinsically diverse European economies, ranging from moderate command-and-control orientation to heavy market influence, defy conglomeration and governance with a single currency. The uniform currency experience has ended in disaster. Because the Euro Zone effort to implement a homogenous monetary policy in a heterogeneous international body is economically untenable, the Euro as a currency will collapse. In 1986, European countries gathered together to initialize the ‘perfectly integrated competitive market economy’, using principles developed by economist Robert Mundell in the 1960s. These concepts emphasize liquidity of physical and financial assets, flexible interest rates, comparable business cycles and asymmetric fiscal policies for use in creating seamless interaction between international bodies within the economic area. This ‘Euro Zone’ exists as the pilot...
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...Table of Contens Introduction 2 1. Foundation of Euro Zone 2 1.1. Background 2 1.2. Optimum Currency Area 3 1.3. Is Europe an Optimum Currency Area? 5 2. Account imbalance in Eurozone 6 2.1. Captial inflow from outside of eurozone 7 2.2. Bond interest rate convergence after eurozone introduction, it increase raising capital of periphery countries. 10 2.3. Price and unit labor cost increase in periphery countries -> competitiveness loss 11 3. Lehman Brothers 14 3.1. Reasons for Bankruptcy 14 3.2. LEVERAGE 15 3.3. LIQUIDITY 15 3.4. LOSSES 15 3.5. Final words 16 4. Greece Financial Crisis 16 4.1. Current Greece Financial Crisis 16 4.2. Greece before Financial Crisis 18 4.3. Industry 19 4.4. Tax Evasion 20 4.5. Populism and Corruption 22 5. Conclusion 23 5.1. Fundamental defect in the euro area – The impossible of independent monetary policy worsen the Economic Crisis of Europe. 23 5.2 Fundamental defect in the euro area – The Eurozone, which was established without financial alliance makes the financial crisis to the banking crisis. 26 REFERNECES 28 Introduction In June, whole world paid attention to Greek economic crisis. Greece, had undergone crisis because of financial crisis from United States since 2008, has evaded a default with two times of relief loans from European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF). But Greece announced that they couldn’t pay back the loan to IMF...
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...In the immediate aftermath of the financial meltdown in 2008, the global crisis has made an important shift. By then not the private banking sector, from where the financial crisis originally emerged from, but sovereign states face the risk of default. In order to analyse the multifaceted character of the European sovereign debt crisis, this essay focuses on its systemic causes. Contrary to the argument of popular Northern European politicians and journalists that blame the inability of Southern European states to manage deficit spending, the Eurozone crisis is firstly determined by imbalances in the European Monetary Union, and secondly by imbalances in the global political economy. This paper argues that the vast amount of sovereign debt is therefore not the result of weak Southern European nations, but of inherent structural illnesses that ultimately led to the current crisis. This essay is divided into two sections. The first section examines the problems of the design of the European Monetary Union. In regard to the theory of an ‘Optimum Currency Area’ by Robert Mundell, it analyses the extent to which the EMU has failed to meet the criteria of optimised efficiency. In the absence of an adjustment mechanism for unequal development in Euro member states, the dominance of Germany as leading export nation created severe inequalities. The second section then focuses on the role of the global political economy and imbalances that were created in the ‘era of financialisation’ following...
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...as the Fiscal Compact. In addition to that we will interview a person who has strong convictions regarding the Fiscal Compact. To conclude, we will present our opinions and recommendations based upon our research and findings. We will seek to predict whether the Treaty will solve the Eurozone Crisis or plunge the EMU into greater financial instability. Background and Contributing Factors A number of factors contributed to the signing of the Fiscal Compact Treaty on 2 March 2012 (European Council, 2013). Although the Eurozone crisis was the main driving force behind the signing of the Fiscal Compact, a number of flaws existed before the collapse of the Eurozone (McArdle, 2012). McArdle (2012) notes that a major drawback was the fact that the Eurozone didn’t have a common fiscal policy. A “Stability and Growth Pact” (SGP) was passed and came into effect on the 1st January 1999 and made a number of key structural changes (McArdle, 2012). However, by that stage the Eurozone had never endured a deep recession. As a result when the worldwide economic recession hit Europe in the summer of 2007, the stability of the Eurozone was shook to its very foundations (European Commission, 2009). The Eurozone Crisis began in 2008 when a number of debt-heavy countries within the EU, namely Ireland, Greece and Portugal, could no...
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...E SSAY COLLECT ION Crisis in the Eurozone Transatlantic Perspectives ESSAY COLLECTION Crisis in the Eurozone Transatlantic Perspectives This publication is a part of CFR’s International Institutions and Global Governance (IIGG) program and has been made possible by the generous support of the Robina Foundation. The Council on Foreign Relations (CFR) is an independent, nonpartisan membership organization, think tank, and publisher dedicated to being a resource for its members, government officials, business executives, journalists, educators and students, civic and religious leaders, and other interested citizens in order to help them better understand the world and the foreign policy choices facing the United States and other countries. Founded in 1921, CFR carries out its mission by maintaining a diverse membership, with special programs to promote interest and develop expertise in the next generation of foreign policy leaders; convening meetings at its headquarters in New York and in Washington, DC, and other cities where senior government officials, members of Congress, global leaders, and prominent thinkers come together with CFR members to discuss and debate major international issues; supporting a Studies Program that fosters independent research, enabling CFR scholars to produce articles, reports, and books and hold roundtables that analyze foreign policy issues and make concrete policy recommendations; publishing Foreign Affairs, the preeminent journal...
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...– bogged down by communist inefficiency and rusting tractors – is long gone. This was the only EU economy ( It joined EU in 2004) to avoid contraction in the dark days of 2009, leading the prime minister to describe Polish economic growth (albeit at a modest 1.6%) as a "green island" amid the red sea of recession elsewhere in the union. There has been massive public investment due to the European football championship (UEFA Euro 2012) that Poland co-hosted. And the weakening Złoty., which suffered when traders became increasingly nervous about the worsening debt situation in Greece and other eurozone members, has helped to keep exports ticking over. “The biggest threat to the security and prosperity of Poland would be the collapse of the eurozone” - Radek Sikorski, Poland's foreign minister. Krzysztof Rybinski, a Polish government critic has said that 2011 was the last good year for the Polish economy and that things will go downhill from the second half of 2012, for want of decent reforms in the face of an economic slowdown, an ageing population and a looming energy crisis. As a party to 89 Double Taxation Treaties throughout the world, Poland is indeed open for international business. Offering a large domestic market coupled with political and economic stability and various government incentives for investors, Poland is placed by the United Nations Conference on Trade and Development (UNCTAD) among the top countries to attract FDI flows in the years 2011-2013 and the 6th...
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