Global Economic Implications of Greece's Exit from Eurozone in 2016

Global Economic
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Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Economic implications for Europe if Greece were ejected from the Eurozone in 2016.........3
2. Ways in which economic policies used by the European community address Greece
macroeconomic issues.................................................................................................................4
3. The ways by which the policy decisions made by Greece since 1973 contributed to the
sovereign debt crisis in 2010.......................................................................................................6
4. Actions by the Greece government and national banks were used to implement fiscal and
monetary policies used by the Greeks to respond to global business cycle fluctuations............7
5. Comparison between Greek economic policy with Australian economic policy for the same
time period...................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
Economics is an area of study which involves understanding of revenue, expenditure,
spending and surplus of a nation. Global economics refers to the combination of economic status
of all the countries in world (Carbaugh, 2011). The main aim of this essay is to analyse an article
having a Case Study: Mismanagement of Fiscal Policy: Greece's Achilles' Heel. Considering this
article, five questions will be addressed which will be related to the Greece economy. In this
essay, the hypothetical situation of GREXIT will be analysed in order to identify the potential
economic implications. Economic decisions along with policy decisions will also be identified
and assessed which were taken by Greece to address their macroeconomic issues and debt crises.
The economic policies of Greece will be compared from Australian economic policies and lastly,
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the actions of Greece government will be analysed which they implemented or their monetary
and fiscal policy.
MAIN BODY
1. Economic implications for Europe if Greece were ejected from the Eurozone in 2016
Greece is a European country and it adopted Euro as its currency in 1990. This initiative
was taken by Greece to make their government bonds strong, as a bond with currency such as
Euro is highly profitable. This opportunity was intended to be used to increase the competition
but rather than increasing the yields of their bonds, Greece government used the cheap credit to
pay for spending and from this the trail of debts begins in Greece. With every passing year debt
to Gross domestic product as Greece begin to increase and in year 2015, the ratio reached to 180
percent (Oliver and Williams, 2016). As Greece is a member of Eurozone, they were eligible to
receive a bail out which can help them to enhance the increase of capital flow in their country.
Till 2015, Greece received three bailouts valued billions of euros. After receiving bailouts of
billions, if Greece was ejected from Eurozone in 2016 then, they would have faced ample
economic implications. The economic implications of this hypothetical situation of GREXIT are
identified and assessed below:
The very first economic implication of GREXIT in 2016 would be that all bailouts
provided to Greece would have been suspended (Oliver, 2017). Greece will no longer be eligible
for any help from European Union. This ejection would have enhanced the debts in Greece and
all living standards could fall by 80% within a time period of few weeks. The government of
Greece owes billion euros to many European nation’s government and International monetary
fund and in the situation of GREXIT, all such debt have be to paid by Greece in no time. In such
situation, it is impossible for Greece to pay off their debts to Europe and ultimately Europe be
left will billions of bad debt that will leave a dent on their economies (Tzogopoulos, 2016).
Another economic implication of GREXIT would have been the discontinuance of using Euro as
their national currency. Government of Greece have to pay social benefit and wages in IOUs,
until any new currency can be introduced in this nation. This discontinuance of Euro will impact
the exchange value of Euro and finally impact wider Eurozone.
Greece has euro as their national currency due to which they enjoy the benefit of competitive
exchange rate but after the implementation of GREXIT, this benefit will no longer benefit
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