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The Great Recession Essay

1544 words - 6 pages

In the final quarter of 2008 the world economy started a period of global economic slowdown, which became known as the “Great Recession”. The situation is especially severe in the Eurozone countries. “In 2010, Greece’s GDP dropped from 235 billion euro to 230 billion euro, a 4.5% decline and the unemployment rate hit a record high of 28% in the last quarter of 2013 making it the country’s worst recession since 1974.”(Tsafos, GDP) As a result it led to a passing of a series of policies which the goal is to reduce the government budget deficit that became known as the “Austerity Measures”. Austerity measures attempt to reduce government budget deficit by increasing tax and cutting public services such as reducing the number of government employee and cutting health care. However the passing of the Austerity plan caused public outrage due to the fact that the plan had result in high unemployment rate. In order to recover from an Economic Recession both the government and its people need to have the patient to fix the issue step by step because the process of recovering from an Economic recession is long and tedious.
The European Union recession recovering process started with the forming of the European Financial stability Facility, also known as the EFSC. The EFSC was created on May 2010 by 27 member states of the European Union with the purpose of safeguarding financial stability in Europe. In a CNBC article Mark Koba states the action that the EFSF take to help improve the economic conditions in the Euro Zone: “The EFSF issues bonds or other debt instruments to provide loans to the countries who need them. The loans are guaranteed by other states in the euro zone.” (Koba, CNBC) After a nation apply for a loan the international Monetary Fund and European Commission will look over the financial books to determine if a loan should be approved. After a loan has been approved the EFSF will spend several working days to raise necessary funds and disburse the loan. EFSF is especially crucial to those countries with debt problems due to the fact that it is difficult for countries with debt problems to borrow money from the international debt market but those countries can still applies for loans from EFSC. Therefore EFSC is crucial first step for rebuilding economy in the euro zone because it provides important funding and international aid for governments that are in deficit to carry out any of the Austerity plan.
Austerity measure are a series of polices design to reduce government’s budget deficit. However the cost to carry out the austerity plan is high and when a country is struggling with its own fiscal problems such as having the burden of high international debt and huge budget deficit, it makes it even more difficult to carry out any fiscal adjustments. Thus, in the end economic recovery all comes down to one thing, whether or not a country has enough capital. In other word instead of jumping straight into reducing the...

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