Writing Homework Help

Mini Case:

Answer each question in 250 words by reading the paragraphs available below. No cheating or plagiarism.

Greece’s Economic Woes

In 2008 and 2009, international financial markets suffered large declines in stock, bond, and real estate prices that caused a slowdown in global economic growth. Many emerging market countries were adversely affected. As economic woes deepened, many developing countries around the world suffered from high government debts accumulated in the booming economic times prior to the financial and economic crises. These debt problems lingered for many years after the crises with broader implications to other nations.

A prominent example is the case of Greece, which experienced a government-debt crisis. In 2000 to 2004 the country was the fastest growing in the Eurozone. But large fiscal imbalances occurred thereafter due to excessive government spending and related borrowing. Also, after the introduction of the euro in 2001, Greece’s current account deficit worsened. The high value of the euro was reducing their exports and devaluation was not possible to boost exports. Other problems with tax evasion and inaccurate economic statistics became apparent. A loss of confidence by investors in financial markets caused rating agencies to downgrade their sovereign government bonds to junk bond status in 2010. To head off sovereign default, the Eurozone countries, the European Central Bank, and the IMF (known as the “Troika”) provided a €110 billion bailout loan to Greece. Another loan of €110 billion was implemented in 2012 to increase debt relief. In December 2014 the Troika was expected to evaluate further funding needs. For Greek citizens, times are tough due to austerity programs that cut government support of social safety nets for poor and elderly people. Some experts believe that Greece should exit the euro and resume the drachma at a devalued rate. Others argue that if other countries, such as Italy and Spain followed Greece and exited too, the euro itself could be in danger of surviving. Also, the concept of European integration would be seriously damaged. Greece may be a relatively small country in the Eurozone, but events there are having historic impacts on all European countries.

1) How did Greece get into trouble with its government debt? Did joining the Eurozone help them pay rising government debts? Explain your answers.

2) Should Greece exit the euro? How would it benefit? What could go wrong? Explain your answers.