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The Recovery Of European Crisis Essay

2654 words - 11 pages

The Recovery of European Debt CrisisIntroductionA.1.Sketch briefly the stating situation of the crisisThe global economy has experienced slow growth since the American economic crisis of 2008-2009, which indicated the unsustainable fiscal policies of countries in Europe and around the world. With a shrinking of 4% GDP in 2009, the European Union experienced the sharpest contraction in the history.In October 2008, Hungary firstly asked for a Stand-By Arrangement (SBA) from the IMF and The EU joined the IMF in providing additional financial support The total financing package amounted to € 20 billion (IMF: € 12.3 billion, EU: € 6.5 billion, Worldbank: € 1.0 billion).The ...view middle of the document...

However, it recovered slightly in the next three years.GreeceThe graph above shows the annual percentage change in real GDP in Greece was dramatic loss since 2009, which means the government debt exceed the government revenue. In addition the economy in Greece is the worst in the European countries. In October 2009, the Greek government announced that the 2009 budget deficit from 3.7 % to 12.5% of GDP, which marked the beginning of the EMU sovereign debt crisis. In the next few months Greek government had further budget problems, while its national reform measures did not have significant effect. Moreover Greek's rating point was decreased by rating agencies from (A-) in early December 2009 to junk bond status at the end of April 2010.SpainIn Spain, the crisis was generated by long-term loans (commonly issued for 40 years), the building market crash, which included the bankruptcy of major companies, and a particularly severe increase in unemployment, which rose to 29.16% by April 2013.[1]According to the graph in 2009, it was confirmed that Spain had officially entered economic recession, with the huge trade deficit 3.7% in 2009 and by 0.1% in 2010. It grew by 0.7% in 2011.Central ProblemThe different fiscal polities in Europe is the key reason for the current economic crisis. Since the economy crisis influenced Ireland, Greece and Spain which cannot pay the debt, Germany promised to help these countries with the Austerity Measures. Austerity Measures means government cutting spending, borrowing less and paying back more debt. This plan sounds a simple solution, however, it is not the right way to solve the problem, which actually worsen the economy instead. Since government cuts the spending, it also cuts many earnings of the citizens. Then people loose jobs and government cannot collect budget. So when earnings reduced, the government collects less taxes and still cannot pay debt.The central problem of this essay is to estimate the economic problems in Ireland, Greece and Spain and the potential impact of a selection of market reforms through the help from the Troika, including European Commission, European Central Bank, and International Monetary Fund.Underlying Problems per CountryIrelandIreland has the fourth lowest tax take as a percentage of Gross Domestic Product in the European Union. However a large proportion of central government tax revenue is derived from value added tax (VAT), excise duties and other taxes on consumption. The standard rate of corporation tax is among the lowest in the world at 12.5%. In society, taxes provide the revenue used to education, healthcare, retirement, social safety, job creation, economic growth and other aspects. The less tax revenue the government collects the less money the government has to make society a better place for people to live, work and enjoy life. In 2010, Ireland had to ask help from the European Union and the IMF to overcoming its crisis. Ireland's problems were mainly caused by state...

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