Question

Discussion (Fiscal Policy)

In the last decade, several European countries, such as Greece, have experienced problems with debt and economic growth. There are some specific issues these countries have faced with their abilities to use fiscal policy and monetary policy. Discuss what issues you think these countries might have been confronting.

Answer 1

Various components have added to the financial emergency or crisis that Greece has been experi- encing since October 2009. A portion of these elements are endogenous like';there is no uncertainty that running reliably extending public shortages related with declining outer seriousness assumed an unequivocal part on the falling apart monetary position of the Greek economy;have to do with the structure of the Greek economy itself, the drawn out macroeconomic uneven characters that the Greek economy faces and the validity issue of macroeconomic arrangement.

Different elements are exogenous (The Eurozone governments neglected to give a reasonable sign showing their status to uphold Greece, while the Greek monetary emergency was heightening) and have to do with the ramifications of the ongoing finan- cial strife and the circumstance of the reaction of Europe to the Greek financial emergency. Macroeconomic policcy framework like monetary and fiscal policy action was not takn at time due to economic union of European countries which make decisions with consesus and thus it took time to cooperatr coordinate and implement the policy that why it becomes more hactic Situation.

Challenges and implications :

There will be a general confidence misfortune in capacity of EU to manage its financial and more extensive monetary difficulties. On the one hand, if Greece is let/compelled to default, infection to other Eurozone bond markets and Eurozone monetary organizations, that hold huge piece of the Greek bonds, is a solid chance. Obligation emergency in one part nation of the Eurozone might trigger a more broad emergency including other Eurozone nations saw to be "delicate" and have comparable budgetary issues (like Spain, Ireland, Portugal). Overflow from Greece into Balkans may be conceivable too through exchange and, more impor-tantly, through budgetary connections