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The Greece economy post the great recession
The Greece economy post the great recession
The Greece economy post the great recession
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In 2009, the Eurozone along with most of the world was struck with a severe economic crisis. An economic crisis that the European Union (EU) or the European Central Bank (ECB) has never seen. This crisis affected every aspect of the lives of its citizens and caused the European Union and ECB to respond in ways that we have never saw. These responses by the EU and the ECB is still being felt today and has sparked intense debate on the role and purpose of the Eurozone, the EU and the ECB. In this paper, the causes of the Eurozone economic crisis, the responses by the EU and ECB to the crisis and the outcome so far on these responses is going to be addressed in this paper.
The Eurozone economic crisis was primarily caused by the interconnectedness
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The ECB to prevent a complete collapse of the banking system, rescued their banks and 1.6 trillion euros, the equivalent of 13 % of the EU’s annual GDP were committed (European Commission 2). This was done to protect bank runs and European savings. The ECB also set up financing facilities quickly for euro area countries experiencing severe financing problems (European Commission 2). For example, when Greece lost access to affordable financing in the market, the EU moved quickly to help Greece by pooling bilateral loans from European governments with the European Commission (European Commission 2). Then the EU preceded to set up two temporary funds, the European Financial Stabilization Mechanism (EFSM) and the European Financial Stability Facility (EFSF). These two funds had a total lending capacity of E500 billion (European Commission 2). This economic crisis has demonstrated that the EU’s banking system is vulnerable and need reforms. In response, the EU and ECB introduced economic reforms. First, 3 supervisory bodies were set up to help coordinate the work of regulators and make sure the EU rules were applied consistently everywhere (European Commission 3). The first body, the European Banking Authority (EBA), was form to deal with bank supervision, including the supervision of the recapitalization of …show more content…
The Greek government committed itself to far-reaching spending cuts, equal to 1.5% of its output (BBC). Greece also pledged to cut the minimum wage and make labor markets more flexible. Greece also introduced a new property tax and suspended 30,000 civil servants on partial pay (BBC). These measures were deeply unpopular with the Greek people, and lead to a wave of protests and crippling strikes (BBC). In Italy, they increased healthcare fees, and cut regional subsidies, family tax benefits and the pensions of high earners. Italy has also cut public sector pay and frozen new employee recruitment (BBC). The new plan is only one employee will be replaced for every five who leave. In the Irish Republic, Government spending was slashed by 4 billion euros (BBC). All public servants ' pay was cut by at least 5% and social welfare reduced. Also, benefits for children was cut and police stations were closed (BBC). In Portugal, the government introduced a 5% pay cut for top earners in the public sector and income tax hikes for high-earners (BBC). The budget for the military was also slashed and there has been widespread privatization. As a result of these cuts, public sector workers staged massive protest against these measures (BBC). In Spain, public sector workers ' salaries were froze and departmental budgets were reduced 16.9%. As a result of these cuts, there has
Throughout all of my research over the recession of July 1990-March 1991 I have concluded that it was not one of the largest recessions the United States has ever seen, but it was also not the smallest. This recession was only eight months long and did some damage, but not a lot. The Gulf War had the biggest impact on this recession along with the oil spill causing a rise of oil prices. The economy hit a low point and was not able to come out of it until the following year after the recession had already technically ended. Unemployment rates were at a low point towards the ending of the recession and because companies were hesitant about hiring new employees’ unemployment did not start getting better until the following year after the recession ended.
Many people today would consider the 2008, United States financial crisis a simple “malfunction” or “mistake”, but it was nothing close to that. Contrary to what many believe, renowned economists and financial advisors regarded the financial crisis of 2007 and 2008 to be the most devastating crisis since the Great Depression of the 1930’s. To make matters worse, the decline in the economy expanded nationwide, resulting in the recession of 2007 to 2009 (Brue). David Einhorn, CEO of GreenHorn Capital, even goes as far as to say "What strikes me the most about the recent credit market crisis is how fast the world is trying to go back to business as usual. In my view, the crisis wasn't an accident. We didn't get unlucky. The crisis came because there have been a lot of bad practices and a lot of bad ideas". The 2007 financial crisis was composed of the fall of many major financial institutions, an unknown increase in mortgage loan defaults, and the derived freezing up of credit availability (Brue). It was the result from risky mortgage loans and falling estate values (Brue) . Additionally, the financial crisis of 2007 was the result of underestimation of risk by faulty insurance securities made to protect holders of mortgage-back securities from risk of default and holders of mortgage-backed securities (Brue). Even to present day, America stills suffers from the aftermaths of the financial crisis.
In the midst of the current economic downturn, dubbed the “Great Recession”, it is natural to look for one, singular entity or person to blame. Managers of large banks, professional investors and federal regulators have all been named as potential creators of the recession, with varying degrees of guilt. No matter who is to blame, the fallout from the mistakes that were made that led to the current crisis is clear. According to the Bureau of Labor Statistics, the current unemployment rate is 9.7%, with 9.3 million Americans out of work (Bureau of Labor Statistics). Compared to a normal economic rate of two or three percent, it is clear that the decisions of one group of people have had a profound affect on the lives of millions of Americans. The real blame for this crisis rests on the heads of the managers that attempted to play the financial system through securitization, and forced the American government to “bail out” their companies with taxpayer money. These managers, specifically the managers of AIG and Citigroup, should be subject to extreme pay caps for the length of time that the American taxpayer holds majority holdings in their companies, as a punitive punishment for causing the Great Recession.
In Euroarea, governments increased taxes to rescue the economy. As the taxes increased, governments are able to get more money. Thus, they are able to reduce their debt. By reducing debt, government can slowly get out of bankruptcy. If a country is bankrupt, it will produce a lot more problem than recession. Therefore, this policy is good to prevent country from being bankrupt. As the debt is huge, governments try to reduce their spending. Since the government spending is reduced, the national debt will not increase rapidly. Futhermore, European Central bank helped to recover from recession by reducing interest rate. It is aim to reduced the inflation. As the inflation increased, people will need more money to buy a goods. To
In 2008, the U.S economy went through the “Great Recession,” possibly as a result of inappropriate and ineffective regulation in the banking system, causing Lehman Brothers to file for bankruptcy. There was a large debt and housing bubble which resulted in plummeting real estate prices and financial securities. Peter D. Schiff’s “How an Economy Grows and Why it Crashes” uses comic illustrations and a simple storyline to teach readers about how the 2008 recession came about and how the U.S tried to relieve it using the ideas of credit, savings, and other economic concepts.
In 1929, there was a huge event that happened in America, which called the great recession. As we know, the great recession causes a lot of negative effects not only on the American economy, but also on the world. Nowadays, although most of the economists do hardly predict recessions in the US, the past record still provides America with a little comfort. A new research indicates that the next giant recession would come soon. According to the online article the America’s vulnerable economy by printed edition, several effects have involved in accounting for this coming recession. Those effects are in terms of housing bubbles, debt bubbles and lower customer purchasing power.
The financial crisis occurred in 2008, where the world economy experienced the most dangerous crisis ever since the Great Depression of the 1930s. It started in 2007 when the home prices in the U.S. Dropped significantly, spreading very quickly, initially to the financial sector of the U.S. and subsequently to the financial markets in other countries.
This essay will examine the causes of the 2008 Global Financial Crisis (GFC) from a Marxist perspective. This paper will specifically examine and critique how Marx’s Theory of Crisis can be applied to understand and interpret the underlying structural causes of the 2008 Global Financial Crisis.
"There is a serious struggle in Greece for three years. We have the largest number of national strikes in Europe. There are strikes at individual plants, factories, private and public sectors. " - General Secretary of the Communist Party of Greece Aleka Papariga, January 30, 2012
The recent global financial crisis that affected not only America but also Europe and other parts of the world resulted in massive unemployment. This is due to the high costs of operation that many corporations faced forcing them to cut on labor costs. There is need for European government interventions to avert this social crisis and prevent the occurrence of such a crisis in future. Unemployment has hit the service sector harder than other sectors with the following being the most affected: automotive, construction, tourism, finance and real estate. The global financial crisis has also increased consumer prices thus pushing inflation. According to McCathie, “the increase in July consumer prices to 1.7 per cent pushed inflation in the currency bloc up towards the European Central Bank’s target of keeping inflation at below, but close to 2 per cent. Eurozone consumer prices had stood at 1.4 per cent in June” (McCathie, 2010).
the Great Depression. Many people had realized they weren’t making money from stock anymore because they dropped so they tried to sell them but very few people bought. For all the people who bought on margin now have to pay, but most couldn’t pay back so they had their belongings taken away from them. The Great Depression is a serious economic downturn in the nation. The Great Depression is caused by the use of credit over speculations monetary policies.
This paper provides an overview of the crisis, outlines the major causes of the crisis, examine alternative solutions to the problem
The Greek economy has seen a large collapse following the recent worldwide recession. The European Union has expressed concerns for the impact that Greece’s economic collapse will negatively affect other member nations. Greece and the European Union are working to reduce the Greek deficit and to contain the economic crisis to Greece.
Eurozone crisis has had huge impacts not only on the economy of the UE but also on the other countries who have economic and financial relations with the members of the union. The reason why we have decided to examine the Eurozone crisis in detail is to have a better understanding of the mechanisms behind this extremely important and complex problem and also to make accurate inferences about the solution alternatives. In our pape...
As mentioned before, the EU is the first of its kind; therefore it is natural for there to be some issues. The first major issue of the EU is its legitimacy. The European Union “still lacks widespread support and legitimacy among the citizens of Europe”. (page 315) This could be caused by the “democratic deficit “that has formed in the EU. The European Union is often blamed for having its institutions and operations too remote and “inaccessible to ordinary citizens”(315). The voter turnouts at for the last European parliament elections on saw “43 percent of eligible voters casting a ballot”(315), the lowest ever. This movement has been labelled “Euro-scepticism”, which is described as an opposition to the process of Europe’s integration. According to the BBC, Eurosceptics in the EU’s parliament have more than “doubled their representation [as] about one-third of the 751 MEPs are Eurosceptic” (http://www.bbc.com/news/world-europe-28107633). One major reason for this “Eurosceptic” movement is the economic issues that presented themselves during the 2009 and the 2011 recession. Europe, like the United States, was hit especially hard by this crisis and many flaws in the EU’s economical system were brought forth. The major issue resided with the common currency of the Euro. Countries with weak economies could not print more money to “devalue their currency to pay their debts and make their exports more competitive”. As the German economy was still “functioning reasonably well, the value of the Euro did not drop sufficiently to give a boost to the weaker economies in southern Europe”(314). This caused countries like Greece and Spain to be bailed out by the European Central Bank, but in return were forced to impose strict austerity measures which led to “soaring unemployment rates reaching over 25%” (314) . Riots