Can Greece recover?
Rady, Dina Abdel Moneim, Greece Debt Crisis: Causes,
Implications and Policy Options, Academy
of Accounting and Finance Studies Journal, Volume 16, Special Issue, 2012,
PP 87-96
This article starts by describing how deep in debt
Greece is (Rady, 2012). By 2010, Greece government debt was 147.3% of its GDP
with maturing debt of $72.1 billion (Rady, 2012). This is compared to the EU’s
restrictions of budget deficits of no more than 3% of GDP and external debt of
no more than 60% of GDP (Rady, 2012). The author cites reasons for the problem
in Greece as:1) Improper economic policies of higher spending accompanied by lower revenues (Rady, 2012).
2) Poor trade policies of focusing Greece’s economy on the services sector (Rady, 2012). Services are the first thing cut when economies turn down (Rady, 2012).
3) Greece’s failure to remain internationally competitive with wage agreements raising nominal wages by 12% during a period of low inflation (Rady, 2012).
4) The 2008 global recession which cut demand for services provided by Greece which made getting more financial assistance more difficult (Rady, 2012).
5) the inability of Greece to devalue the Euro which would cheapen Greece’s debt (Rady, 2012).
The conclusion of this article is that, if Greece defaults on its debt, other southern European nations will be adversely affected (Rady, 2012). What is needed to prevent a default is tighter and stronger control by the EU, tax increases, and spending cuts (Rady, 2012). Greece also needs to promote the growth exports and more competitive wages (Rady, 2012).
I have been very interested in this topic. However, I feel that the authors' reasons for the economic failure were a little simplistic. The reasons listed for the failure are from "MacroEconomics 101." I want to know why the failures happened. I want to know the players and be the "fly on the wall" during closed door conversations. The main reason I am looking forward to graduation is that I will be able to read what I want and not have to stop reading to write a report. LOL
ReplyDeleteAmen. I actually have grown to dislike reading.
ReplyDeleteWhile the authors' reasons for Greece's failure are very simplistic, I think they are correct. Having grown up with Greek citizens, I have seen (form their perspective) that, not only the government but also the people, do often have an attitude that their way is the best, and if it fails, it's someone else's fault. I think that the government was doing the people's bidding, and it has hurt them and many others.
This seems like a Catch 22 situation where Greece is so dependent on the EU, but the EU is also dependent on Greece recovering and paying its debt. A growing economy and corrective economic measures will help Greece eventually recovery, but I believe it will take a long time. The economy did not fail overnight. If Greece does recover, it will inevitably strengthen the EU as a whole.
ReplyDeletethe crisis in Greece do impact any countries or territories with whom it have relationship. the recovering economy can help Greece out to some extent, however the fundamental solution is to change the policies and increase economic power in Greece.
ReplyDelete