Term paper on economic crisis

Writing Tips There are several important aspects you should understand writing essay about financial crisis in accordance with essay basics.

Term paper on economic crisis

The cold attitude of Greece in its business dealings with countries all over the world reduces their chances of receiving foreign aid for paying out the debts Abboushi Inefficiencies in the Public Sector The real appreciation of wages in the public sector and the increase of employees in the public sector of Government and municipalities led to a reallocation of capital and labour away from the private sector and especially from export oriented sectors leading to the loss in competitiveness and the increase in the current account deficit Kouretas, Georgios and Vlamis The private sector received a setback, as it was immensely dependent on government projects and less on its own efforts for research, development and innovation.

High level wage offered to government employees made the average person to search for a job in the public sector where payment is not related to productivity. This eventually deteriorated the competitiveness of Greek economy. Kouretas, Georgios and Vlamis provide an evidence of the fact that Greece experienced the highest growth increase in public spending and public administration employment which lead to a gigantic public sector during the period of Not only this, the Greek had low entrepreneurship motives and the entrepreneurs' encountered difficulties in starting up their business due to bureaucratic obstacles that further inflate corruption.

The Adjustment Programme implemented by the European Union aimed at cutting down the expenditures of the Greek Government. Greek Government planned for budget cuts, freezing of wages of public sector, lifting up retirement age, putting higher VAT taxes, cutting down of pension and social service payments.

The Greek pension system itself was on the brink of insolvency before the EU's implementation of the Adjustment Programme.

Thus, the Programme removed the incentives for retirement before the statutory age Taylor The austerity measures catered two core economic issues being encountered by Greece.

One is the cutting down of large government budget deficits and the other being stabilization of the economy in cyclical economic downturn.

Term paper on economic crisis

However, it always remained a matter of question that how long could the Greek government count on public support for the austerity measures in this era of sharp recession. Structural Reforms Greek Prime Minister named Papandreou introduced long-term structural reforms for the Greek economy.

These reforms cover the domains of healthcare, pension systems and public administration. His plans aimed at boosting competitiveness by fostering enhanced development in the private sector, supporting research, development and innovation and enhancing employment and economic growth.

The measures included calculating pensions on the basis of lifetime contributions as opposed to the last five years of earnings.

His efforts aimed at tightening public regulation and increasing accountability in Greek healthcare systems. The reforms target the increase of attracting new foreign investment in Greece by boosting export of goods and services. It intends to increase investment and development in sectors which had strong comparative advantages for trade and investment, like renewable energy sector and transportation networks.

However, these structural reforms encountered the substantial challenge of maintaining public and political support for austerity measures and economic development reforms.

Writing an Essay about Financial Crisis

The instability in Greek economy can have considerable consequences for the EU. It is expected that might spread across European bond markets and draw in countries like Italy, Spain, Portugal and Ireland as the crisis has contributed to a weakening of the euro's foreign exchange value.

Germany tends to be the most influential state of the Eurozone and possesses the largest economy as well. However, it lies amongst the sceptical member states. Some statistics indicate that majority of the Germans are unwilling to render help to Greece.

A major reason for this is the fact that major EU countries are also encountering financial hardships and have failed in modernising their own economies Nelson, Belkin and Mix Many viewed the outside intervention by IMF as a potential humiliation for the Eurozone, as the Eurozone failed in demonstrating its credibility and strength in taking care of its own problems.

However, gradually all the member states favoured the twin-track approach of combining the assistance and aids of Eurozone states and the IMF. The IMF also stands in catering Greece with technical assistance along with provision of financial assistance. Some economists opined that the level of assistance provided to Greece by IMF would be far much smaller than the broader package of financial assistance catered by the Eurozone member states Nelson, Belkin and Mix The austerity plans have contributed little on fiscal woes and have only stirred up anti-governmental tension among the Greek population Vickstrom On one hand the European officials accepted the Greek plan for resolving the debt crisis through fiscal consolidation process, yet they were unaware of the potential hazards that were encountered on the other side of the picture.

Financial crisis - Wikipedia

The increase in taxes and drastic reduction in government spending paved the way for major declines in economic activity and increased illiquidity in the economy. This led Greece towards unemployment and pushed the country into an era of recession.

Due to declining economic activity, the budget revenues won't be increased by charging of higher taxes. Now the Greek government was attacked by two sides.

On one side it has to reduce its deficit via restrictive fiscal policy, while on the other side it had to maintain its economy for sustained growth which can be achieved by expansionary fiscal policy.

The instruments of fiscal policy are the only tool on which the Greek government could rely, as Greece is a part of the Eurozone and it is not possible for it to have an independent monetary policy.

Moreover, there doesn't exist any possibility for currency devaluation for solving the current problem of stabilizing the economy Todorivic and Bogdanovic Greek citizens are now much concerned about the worsening economic conditions.

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