Sustainability of Public Debt in the European Monetary Union. A Case Study of Greece
Sustainability of Public Debt in the European Monetary Union. A Case Study of Greece

Author:

Publisher: GRIN Verlag

Published: 2017-02-07

Total Pages: 68

ISBN-13: 366839346X

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Bachelor Thesis from the year 2015 in the subject Economics - Finance, grade: 5, University of Zurich, language: English, abstract: This bachelor thesis discusses the sustainability of government debt on a theoretical level with the model of the government budget constraint and its application in a case study. Therefore, the situation of Greece is used as a prime example for the current sovereign debt crisis in the European Monetary Union. It points out with quantitative data, what has led to the high public debt in Greece and what are the consequences of this debt accumulation. For this the sustainability and the development of government debt and its determinants will be analysed. In conclusion, it discusses the options to escape of this sovereign debt crisis for Greece and the European Monetary Union as a whole. In March 2012 Greece received another bailout loan of 144.7 billion euro from the European Financial Stability Facility (EFSF) and 19.8 billion euro from the IMF in several tranches until 2014 after a worsening recession and the missing implementation of the conditions. In July 2015 the European Commission arranged to mobilise more than 35 billion euro until 2020, while they already paid out up to this point 4.4 billion euro (European Commission 2015). Still the problem has not been solved yet and Greece is still not able to get control of its debt by itself. The government debt is a relevant topic in economics and has become even more relevant since the outbreak of the European sovereign debt crisis. Further research in the issue of government debt could help us to understand how government-debt crisis develop, how the current sovereign debt crisis may be solved as well as how we could prevent from future crises. To understand the problem of high debt, we also need to understand the necessity of public debt, the arithmetic behind it and its implications on the economy of a country and the whole economic system.

Greece
Greece

Author: International Monetary Fund. European Dept.

Publisher: International Monetary Fund

Published: 2015-07-02

Total Pages: 24

ISBN-13: 1513512358

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This paper analyzes the debt sustainability in Greece. At the last review in May 2014, Greece’s public debt was assessed to be getting back on a path toward sustainability, though it remained highly vulnerable to shocks. By late summer 2014, with interest rates having declined further, it appeared that no further debt relief would have been needed under the November 2012 framework, if the program were to have been implemented as agreed. But significant changes in policies since then are leading to substantial new financing needs. To ensure that debt is sustainable with high probability, Greek policies will need to come back on track.

Greece
Greece

Author: International Monetary Fund. European Dept.

Publisher: International Monetary Fund

Published: 2016-05-23

Total Pages: 23

ISBN-13: 1484362098

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This paper provides preliminary debt sustainability analysis (DSA) of Greece. Debt was deemed sustainable, but not with high probability, when the first program was adopted in May 2010. The much deeper-than-expected recession necessitated significant debt relief in 2011–12 to maintain the prospect of restoring sustainability. Serious implementation problems caused a sharp deterioration in sustainability, raising fresh doubts about the realism of policy assumptions, especially from mid–2014. Developments since last summer suggest that a realignment of critical policy, and DSA assumptions can no longer be deferred if the DSA is to remain credible. Staff believes that revised program targets remain sufficiently ambitious to warrant continued support from Greece’s European partners.

Reflections on the Greek Sovereign Debt Crisis
Reflections on the Greek Sovereign Debt Crisis

Author: Aristidis Bitzenis

Publisher: Cambridge Scholars Publishing

Published: 2014-09-26

Total Pages: 396

ISBN-13: 1443867837

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The euro was generally considered a success in its first decade. Nevertheless, the “unanticipated” financial crisis in the summer of 2007 has developed gradually into the worst global economic crisis in post-war economic history and a sovereign debt crisis, calling into question the endurance of positive externalities under the current form of European economic integration. The experience of double-dip recessions in the core of the euro-area and the occurrence of a deflationary spiral in its southern periphery brings into question the wisdom of fiscal consolidation via austerity in the adjustment programmes adopted to exit the crisis. They also put into doubt the adequacy and efficiency of the European Economic and Monetary Union’s core elements, its political instruments and macroeconomic assumptions, as can be seen in the role of the Stability and Growth Pact and the stance of the European Central Bank. The title of this collective volume refers to the country where the European sovereign debt crisis began, while its contents concentrate on the extent to which this crisis should be a national or a European concern. Moreover, the focus on Greece stimulates discussion about the neglected factor of the shadow economy and the potential to boost government revenue through its successful transfer to the formal economy. The chapters address the inefficiencies of both euro-area institutions and policies adopted to exit the current predicament. Experts from several disciplines review the literature and critically evaluate the existence of issues such as contagion effects, domino effects, deflationary spirals, institutional efficiency and the reality of the option to exit the euro-area.

The European debt crisis
The European debt crisis

Author: Costas Simitis

Publisher: Manchester University Press

Published: 2016-05-16

Total Pages: 540

ISBN-13: 1526112000

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In this book, former Greek Prime Minister Costas Simitis examines the European debt crisis with particular reference to the case of Greece. Greece was the first Eurozone country to face an enormous deficit, which reached 15% of GDP in 2009. As the Greek crisis unfolded, other Eurozone countries displayed identical symptoms, albeit in varying degrees of severity. From a strictly Greek predicament the debt crisis quickly turned into a problem for the European Union as a whole. This first English language translation investigates the causes of this spillover and chronicles the policy responses to combat it. It also discusses Greece’s troubled political economy, the country’s difficulties in adjusting to the demands of its creditors and the vehement social and political reactions to the policy of austerity. Through his comprehensive and authoritative analysis, Simitis provides valuable insights into the crucial interconnection between Greece’s own economic troubles and the wider European search for macroeconomic stability and sustainable economic growth. As such, the book appeals well beyond those with a narrow academic interest in Greece. This is very much a discussion about the future of the Eurozone and the European Union as a whole.

The Euro Crisis
The Euro Crisis

Author: P. Arestis

Publisher: Springer

Published: 2012-04-05

Total Pages: 292

ISBN-13: 0230393543

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A detailed and informed analysis of the current crisis facing the eurozone, examining the root causes and exploring the possible outcomes and uncertain future of the European Union and its currency. Chapters include case studies of Portugal, Ireland, Spain and Greece, as well as broader comparative perspectives.

Greece
Greece

Author: International Monetary Fund. European Dept.

Publisher:

Published: 2015

Total Pages: 5

ISBN-13: 9781513589152

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This paper presents an update to IMF staff's Preliminary Public Debt Sustainability Analysis on Greece. Greece's public debt has become highly unsustainable. This is owing to the easing of policies during 2014, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics. The financing need through end-2018 is now estimated at euro 85 billion, and debt is expected to peak at close to 200 percent of GDP in the next two years, provided that there is an early agreement on a program.

Debt Sustainability and Economic Convergence of Euro-area Member States, Challenges and Solutions
Debt Sustainability and Economic Convergence of Euro-area Member States, Challenges and Solutions

Author: Xavier Ragot

Publisher:

Published: 2015

Total Pages: 18

ISBN-13: 9789282365502

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Countries within the euro zone are facing three main perils. The first is the problem of nominal divergences, which materialize in unit labor cost differences. The second is the lack of aggregate demand in Europe. This is the main issue in the short run. The third is the high level of public debt, which generates an issue of sustainability in some countries, like Greece. The exclusive focus on both public debt and unit labor costs hasproduced a demand crunch in the euro area, which is the main cause of the deflation risk and the high current account. The lack of demand is creating concerns about debt sustainability. A sustainable debt is not in fact a low public debt or a rapidly decreasing public debt. It is a public debt for which there is no risk of default. The default risk in advanced countries is not an economic risk, but a political risk. High unemployment and a long-lasting recession are eroding political support for the European project, which can ultimately reduce countries' ability to generate a sufficiently high primary budget. All the flexibilitiesin the current treaty should be used to boost demand in Europe, without increasing the public debt burden of the heavily indebted countries. As some surplus countries, like Germany, have decided not to use their fiscal space, one efficient way to promote public demand is to design a public investment plan that is much bigger than the initial Juncker Plan and is financed by funds backed by either national or European debt, which could be bought by the central bank.In addition, the European Semester should clearly start with an assessment of the aggregate fiscal and monetary stance in the euro area so as to provide the desired orientation for the European policy mix. This orientation should be consistent with country-specific recommendations.

Greek Debt Crisis. A Representation of the Eurozone Crisis
Greek Debt Crisis. A Representation of the Eurozone Crisis

Author: Caroline Mutuku

Publisher: GRIN Verlag

Published: 2018-07-16

Total Pages: 13

ISBN-13: 3668751269

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Academic Paper from the year 2018 in the subject Business economics - Economic Policy, grade: 1, , language: English, abstract: Over the years, fiscal crisis in various regions have led to recession which hurts the economies of the concerned countries. Currently, Europe is battling a detrimental debt crisis that has put economic growth across Europe at stake. In this case, Greece is the most hit country by the current European debt crisis because it has huge debt to settle. Ironically, it is quite difficult to experience any significant growth because its competitiveness within the Eurozone remains low, yet it is expected to recover and settle its debts. Greece has no control over the Euro because it is controlled by the European Central Bank that regulates financial flow and rates within the Eurozone. In general, the European debt crisis has affected European countries in different ways. For instance, Greece owes Germany and France a huge government debt. It is estimated that Greece, Portugal and Italy are the biggest debtors within the Eurozone. By the end of the first quarter of 2015, Greece has a government debt to GDP ratio of 168.8%, followed by Italy with 135.1%, whereas Portugal recorded a ratio of 129.6%. On the other hand, the lowest debtors were Bulgaria with the ratio of 29.6%, Luximbourg with 21.6& and Estonia with 10.5%. As a result, the public debt to GDP ratio for the Eurozone has risen to 92.6 percent in the first quarter of 2015 (RT, 2015). Therefore, this article will give a comprehensive overview of the European debt crisis with focus on Greece.

Debt Sustainability and Economic Convergence of Euro-area Member States : Challenges and Solutions
Debt Sustainability and Economic Convergence of Euro-area Member States : Challenges and Solutions

Author:

Publisher:

Published: 2015

Total Pages: 18

ISBN-13: 9789282365519

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Countries within the euro zone are facing three main perils. The first is the problem of nominal divergences, which materialize in unit labor cost differences. The second is the lack of aggregate demand in Europe. This is the main issue in the short run. The third is the high level of public debt, which generates an issue of sustainability in some countries, like Greece. The exclusive focus on both public debt and unit labor costs has produced a demand crunch in the euro area, which is the main cause of the deflation risk and the high current account. The lack of demand is creating concerns about debt sustainability. A sustainable debt is not in fact a low public debt or a rapidly decreasing public debt. It is a public debt for which there is no risk of default. The default risk in advanced countries is not an economic risk, but a political risk. High unemployment and a long-lasting recession are eroding political support for the European project, which can ultimately reduce countries’ ability to generate a sufficiently high primary budget. All the flexibilities in the current treaty should be used to boost demand in Europe, without increasing the public debt burden of the heavily indebted countries. As some surplus countries, like Germany, have decided not to use their fiscal space, one efficient way to promote public demand is to design a public investment plan that is much bigger than the initial Juncker Plan and is financed by funds backed by either national or European debt, which could be bought by the central bank.In addition, the European Semester should clearly start with an assessment of the aggregate fiscal and monetary stance in the euro area so as to provide the desired orientation for the European policy mix. This orientation should be consistent with country-specific recommendations.