The topic of the term paper is:
The Role of International Financial Institutions in the Greek Debt Crisis
Your term paper should have the following structure:
1) Background
Provide some background on the Greek debt crisis. Describe how the Greek government debt
and the Greek current account developed in the years after Greece joined the Eurozone.
Explain how this eventually led to the debt crisis.
2) Official Support for Greece
Describe the assistance given to Greece by the International Monetary Fund (IMF) as well as
by European institutions.
3) Creation of the European Stability Mechanism
Describe how the debt crisis gave impetus to the creation of the European Stability
Mechanism (ESM). What are the functions of the ESM?
4) The Involvement of the IMF in the Greek Debt Crisis: A Critical Assessment
In this section, you should discuss questions such as: Did the IMF loan achieve its
objectives? Are there problematic aspects to the involvement of the IMF in the Greek debt
crisis? Are there things the IMF could have done differently?
Literature
Clemens Fuest (2011): “Will the Reform of the Institutional Framework Restore Fiscal Stability in the
Eurozone?”, CESifo Forum Vol.12(2), pp. 34-39 (link)
European Central Bank (2011): “The European Stability Mechanism”, Monthly Bulletin 07/2011 (link)
European Stability Mechanism (2019): “Runaway train: Greece sounds the alarm”, in Safeguarding
the Euro in Times of Crisis. Luxemburg: Publications Office of the European Union, Chapter 3. (link)
International Monetary Fund (2013): “Greece: Ex Post Evaluation of Exceptional Access under the
2010 Stand-By Agreement.” Country Report No. 13\156 (link)
Reinhardt, Carmen and Christoph Trebesch (2016): “The International Monetary Fund: 70 Years of
Reinvention.” Journal of Economic Perspectives 30(1), pp. 3-28 (link)
Note that this literature list is only a suggestion. Feel free to use any other suitable references.
If you have any questions about the term paper, do not hesitate to contact me at
lukas.voellmy@essex.ac.uk
Solution
Introduction
The Greek debt crisis came into the light in 2009 when a newly voted government proclaimed that the budget deficit was higher than previously disclosed. The new administration disclosed that the deficit was estimated at 12.5% GDP, which was four times the maximum limit of 3% set by the Eurozone budget guidelines. This paper looks at the background of Greek government bet, the support the country received from IMF and European Institutions, the establishment of European Stability Mechanism (ESM), and the involvement of the IMF.
Background
Greece joined Euro on January 1, 2001, and it is when the government spending and borrowing increased while tax revenues weakened. In October 2009, a new administration reported that the government deficit was worse than it had been reported. For instance, while the 2009 deficit was estimated at 5%, the actual results showed it was 7.7% while the 2009 deficit projected at 3.7% was actually 12.5% (European Stability Mechanism 2019). Between 2001 and 2009, the situation worsened as there were rising wages, low productivity, and structural problems. On January 14, 2009, the Standard & Poor downgraded its rating of Greece from A to A- an announcement that led to loss of investment. The Greek 10-year bond yield spreads to Germany widened to 238 basis points at the end of the year from 138 basis at the beginning of the year (European Stability Mechanism 2019)………………………………..To access the rest of the solution for $15, please click on the purchase button.
