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Greece Government 2008-2012

GreeceGovernment 2008-2012

In2009,Greece was inthe headlines for all wrong reasonsitsfiscal crisishadturned quickly into as a great debt crisis. Within a short period,the crisis had finally mutated into a full-blownrecession. According to Lane the standard account of Greece’s debtcrisis began at the end of the year 2009 when the then incominggovernment (socialist government) made an announcement regardingmisreportingof previousfiscal data in the records. The revised estimates for the year 2009raised the budget deficit from 3.7% to 15.6% of the country’s GDP,and the public debt rose from 99.6% to 129.4% of Greece’s GDP.Greece government faced current account deficits that it could nolonger sustain itself by borrowing from International and relatedcapital markets.Thegovernment has engaged inthe process ofpursuing fiscal austerity and other structural reform policy toaddress this deficit (Lane&amp Philip, P. 49 – 67).

Tohelp adjust its spending levels, the Greece government led byPapandreou introduced the economicpolicy. The aim of the plan was strivingtowards improvingGreece’s spending levels by regulating expenditure levels and taxrates tohelp monitor their influence on Greece’s economy. After takingoffice in October2009,Papandreou government unveiled four sets of fiscal austerity thatlookedforward tobringing the country’s deficit from 13 percent (13%) of the totalGDP in the year 2009 to below 3 Percent (3%) by the year 2014. TheGreece government had hoped that spending cuts and increased taxesbetween January of the year 2010 and March of the same year wouldhelp in restoring investor confidence in Greece. However, financialmarkets never reacted as anticipated.Additional austerity measures were further recommended by IMF and EUafter the Greek government went to request for their assistanceagain, their first attempt having failed (Lane&amp Philip, P. 49 – 67).

Accordingto Pettingerthecutting of the government expenditure ina bid to realize areductionin budget deficit has caused a serious problem in Greece. The cuttingof government spendinghas made the recessionworse in Greece. The rate of unemployment has increasedsubstantially.Beinga member of the EURO, Greece feels that she has no other option offunding its accumulated deficits other than cutting governmentexpenditures.The unemployment in Greece is as a result of the prolongedrecession in the country which has led to a fall in output anddecline in the averageeconomic activities of Greece citizens.

Papandreou’sgovernment in Greece introduced structural reforms policy to theGreek economy. He proposed a broadrange of improvementsto the systems such as the pension and those involving health caresystems and to the public administration sector of Greece. Hisgovernment announced measures to help in boosting Greece’s economiccompetitivenessduring this period through creating employment opportunities andenhancing the economic growth of Greece, to help in fosteringincreased development of the private sector. He also vowed to supportresearch, innovation,and technology in his country.

Onthe issue of the monetary policy in Greece, the ECB setsmonetarypolicy for Greece. Itmeansthat Greecedoes not configure the currency system. The problem at hand is that the ECB significantlyconsiders the whole of the EURO zone and is not setting monetarypolicy that Greece is in dire need of for it to grow economically.According to Mishkin,if Greece was in possession of a Central bank, they could engage inthe process of printing money and trytoengagein quantitativeeasing which would have at least helped it in reducing deflationarypressure and boost its demands. But it’s unfortunate that thisoption is not available for them currently.

Accordingto Mishkin. in spite of various increase monetary efforts, the Greecegovernment is still facing the problem of sustaining itselfeconomically. Its money supply continues to shrink. The ECB has aparticularpolicy called Emergency LiquidityAssistance (ELA) but the way it’s grudgingly done it made thesituations even worse for Greece. Instead of calming the crisis itaccelerated it.

Also,if the Government of Greece could have applied the Supply and Sidepolicy to some extent,it could have saved Greece from the recession it went through thisperiod. Itincludesany systemin a country that aimsat improving the country’s economic productive ability andpotential to produce.

Thereare several methods that the Greece government would have used toimprove the country’s supply-sideperformance. The first factor the Greece government failed toconsider is the tax system. The Greece government could have used itstax system to provide incentives to its people to help in stimulatingfactor output (Schmieding).It’s unfortunate thattheGreece government only focused onreducing its expenditure. Second, forthe Greece government to have used the supply and side policy insaving its country is through introducing measures that aimatimproving labor mobility. Itwouldhave created a positive employmenteffect on productivity. Likewise,this would have helped in improving workand market flexibility.

Thepolicies introduced by the Greece government led by Papandreouwereto help in curbingthe recession in Greece and get its economy on track. The primaryobjective of Papandreou’s government was to ensure that it broughtdown Greece publicdeficit from an estimated figure which was 13% to below 3% by theyear 2014. The primarycauses of the deficit were due to over borrowing. Euro- zonemembers welcomed this idea by Papandreou’s government. However,some observers raised concern on its significantimplications such as chances of unemployment and the possibilitiesof the recession going on for a long time. However, this move did notresolve the financial assistance issue by the Greece government.

Theimpact of these policies by the government was that it had short termand long term effects on the people and the Greece economy at large.The taxation systemseemsto be having long term effects while the reduction of governmentspending appearsto have short-termeffects. The decreaseingovernment spending brings aboutemployment.Nevertheless, the country continued borrowing and depending on otherInternational capital markets. I can,therefore,say thatthe policies formulated by the government during this period didlittle in saving Greece from the debt crisis.

Inconclusion, in the period 2008-2012 Greece was faced with chroniceconomic imbalances and high external debt. They led to itsgovernment making an effort to try and bring the situation back tonormal through the implementation of policies. An example of theplans includes economic strategies whose aim was to cut downgovernment expenditure and adjusting tax rates to take control of thesituation which however did not save the condition immediately asborrowing was still at its greatest threat.The policies were however not as efficientas it expectedand the Greece government led by Papandreou had to seekother means such as the creationof structural reforms to support the fiscal policy which was in itsimplementation and monitoring phases. The systemswere not as efficientas the government had hoped for as they brought about the risein unemployment and increased recession just to mention but a few.

WorksCited

Lane,Philip R. &quotThe European sovereign debt crisis.&quot&nbspTheJournal of Economic Perspectives&nbsp26.3(2012): 49-67.

Mishkin,Frederic S.&nbspMonetarypolicy strategy: lessons from the crisis.No. w16755. National Bureau of Economic Research, 2011. Print.

Pettinger,Tejvan. &quotPolicies to reduce unemployment in Greece.&quot 24March 2014. Economicshelp.27 November 2016&lthttp://www.economicshelp.org/blog/10284/economics/policies-reduce-unemployment-greece/&gt.Website.

Schmieding,Holger. &quotGreece Needs Growth, But How?&quot 3 February 2015.TheGlobalist.27 November 2016http://www.theglobalist.com/greece-needs-growth-but-how/.Website.