TITLE

GREECE DEBT CRISIS: CAUSES, IMPLICATIONS AND POLICY OPTIONS

AUTHOR(S)
Rady, Dina Abdel Moneim
PUB. DATE
September 2012
SOURCE
Academy of Accounting & Financial Studies Journal;Sep2012 Supplement, Vol. 16, p87
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Following the global financial meltdown of 2007-2008, Greece accumulated massive deficits and public debt levels; by 2010, a sovereign debt crisis was pronounced in Greece. The Greek government operated at a deficit of 10.4% of GDP in 2010, and in spite of a number of euro rescue deals agreed upon by EU leaders, market volatility persisted through the end of 2011 and debt rose to 147.3% of GDP. The paper examines the probabilities of Greece default, explores possible causes of the crisis and its implications, exploring a range of policy options to get the country out of this crisis. The paper finds the Greece's debt crisis is a result of improper economic policies that resulted in its high government spending and weak revenues, accompanied with structural rigidities, and inadequate intra-euro fiscal monitoring, following its adoption of the euro in an environment of a global recession. Greece can find its way out under conservative assumptions, if it chooses to tackle the root causes rather than the symptoms of the crisis, focusing on growth and productivity and ensuring that the appropriate fiscal and structural reforms are fully implemented, which can happen only under external financial assistance otherwise Greece could be forced to default on, or leave the Euro. The crisis highlighted the economic interdependence of the EU, and questions the future of the euro.
ACCESSION #
84334957

 

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