Implications of Troika in European Economic Crisis

Table of Contents
Preface
Introduction
Central problem
Aim of the report
Sub questions
Ireland
Troika (Ireland)
Greece
Troika (Greece)
Spain
Troika (Spain)
Housing scheme of Netherlands
Conclusion

Lessons learnt
Literature
Preface
This course is mandatory and essential in the field of business management and cannot be
ignored, economics study provides valuable information for making decisions in everyday life.
Accounting and economics are involved in dealing with financial matters and this course will be
important to my future career especially by understanding demand and supply more clearly and
more detailed than I did during the bachelor’s degree in accounting. Throughout the module, I
took an overview of the global economic structure through many of the discussions and
examples I have shared and discussed as group members during the class. To be honest,
managerial economics was not one of my favorite subjects during my educational career. But to
be fair, it helped me to understand many of the different theories and regulations that have taken
place in the world markets. My expectations were to understand in depth how countries trade
between each other, what measures governments take in such cases and how people may be
affected if the price on goods increases and what effects it may have. In general, I gained
valuable information, especially in understanding the European market through the discussions
and examples that were raised by Prof. Bert. Therefore, I would like to thank Prof. Bert for his
valuable and useful information.
Introduction
The implications of the global economic crisis are due to the United States financial crisis in
2008, which has affected many countries including Greece and economic influence still expects
Greece to default on its debts. (Joseph N. Lekakis & Maria Kousis,2013) The financial crisis
with the economic recession will have a big impact on countries within the European Union as
well as countries within the Euro zone. After the crisis, there had been a parcel of turmoil inside
the economies of the different European countries. It is known that countries such as Greece,
Spain and Netherlands have been greatly affected by the crisis and the International Monetary
fund in conjunction with the ECB will organize a mechanism aimed at providing financial aid as
well as guidance to recover from this crisis. Countries such as Greece, Spain and Ireland are
facing a real crisis in the high prices of living in these countries. Therefore, they had to enroll in
a program that would provide them financial support. So, the largely influenced countries will
receive mutual assistance from the International Monetary Fund and the European Central Bank
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to recover from this crisis (Katsanidou & Otjes, 2016). In general, Euro zone countries are no
longer able to borrow money as they were previously and can no longer repay their borrowed
debt. Hence, the European Union was not able to reduce this large problem in the economy
except with the help of the International Monetary Fund. European banks have not been able to
deal with this problem in addition to facing liquidity problems. (Richard & Baldwin,2015) The
following paper will be utilizing the literature for analyzing the financial crisis in Europe and the
combined efforts will be making a difference within the stabilization of the circumstance return
to normal.
Central Problem
Troika is a body of the European Commission, the European Central Bank (ECB) and the
International Monetary Fund (IMF). This body will generally control the circumstances that have
taken place because of the huge financial crisis that happened throughout Europe and its huge
impact within European economies. This specific joint body had been made for saving the
adversely influenced countries such as Netherlands, Spain and Greece by offering them with
financial support to the governments and the different institutions which were at the brisk.
Therefore, the Troika loans have been profiting Greece and Spain on the huge scale. A few of the
countries were moreover expected for modifying their whole economies in an effort which
would also help in rebuilding their wage among the other changes.
Aim of the report
The objective of the report is to create an understanding the different forces of the demand and
supply that will be determining the market structure, the worldwide misery at that time and will
be influenced on the global economy. The research will be tending to the interventions executed
by the different global organizations for dealing with the economic crisis with the different steps
of the Eurozone in primary countries specifically Ireland, Spain, Greece and Netherlands. The
central research question is:
What were the various economic impacts in the situations which led to the continued need or the
financial support for Spain, Greece and Ireland?
The sub questions
1. What was the effect of the increased VAT of Ireland on the economy of the country in
terms of production?
2. What are the effects of the Greek government cancellation of the transport license?
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3. What happened when there was pay cut in Spain on the employees of the economy of the
country?
4. What happened when the liberalization of the housing market took place in Netherlands
and how will it affect the economy of the country?
5. Was the Netherland’s rule for the donation scheme fair according to the economic
principle?
Ireland
The Irish government was spending heavily in addition to the Irish banks that were known to
fund during the middle of the property bubble, which led to an increase the debt of Ireland
significantly. Therefore, the Irish bank lost more than hundred billion euros. Most of the loans
were given to the property developers and the homeowners which were show within the property
bubble, the burst took place in the year 2017 and the economy collapsed at 2008 and the
unemployment rate rises from four percent in the year 2008 to fourteen percent by the year 2010.
This resulted within the rise of shortfall of more than thirty percent of the gross domestic product
(GDP) in the year 2010. After the year 2011, the European leaders will be concurring to cut the
interest rate which Ireland had been paying on the European Union bailout loan from more than
six percent and after that the loan doubled. (Katsanidou & Otjes, 2016). Because of all these
reasons, the government concurred for reducing the budget deficit to below three percent by the
year 2015. The economic crisis within the Eurozone saw several economies within the region to
plunge into complete financial crisis with the bank and governments being the most victims of
the whole crisis. When the bubble burst in 2008, many companies could not pay off their debts
and many companies ended up bankrupt. (Mark Broad, 2013)
Intervention by Troika
Since the economic conditions within the Eurozone begun falling apart, the formation of Troika
took various steps for advising the influenced countries on the different steps.
A. Ireland
The 26 percent increase in value added tax (VAT) by the Irish government is a major change,
which will have positive and negative effects. For the positive effect, the positive effects of the
increase in value added tax can be seen as leading the efforts to create a huge amount of income
and hence the increase in value added tax will help in the total income of the state (Raudon &
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