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==Sustainability adjustments==
==Index and Glossary==
There is an index to the topics dealt with in the economics articles [[Economics/Related Articles|here]], and a glossary of economic terms [[Economics/Glossary|here]].


The primary budget balance (as a percentage of gdp) required to avoid an increase in the [[public debt]] is given by f&nbsp;=&nbsp;d(g&nbsp;-&nbsp;r) where r is the annual interest rate on the debt; and g is the annual growth rate of nominal GDP (See [[Fiscal policy/Tutorials#The debt trap identity|the debt trap identity]])
See also the  [[Politics/Index|'''index to the politics articles ''']].


:::{|class = "wikitable"
[[User:Nick_Gardner#Methodology|methodology]]
|
! Portugal
! Ireland
! &nbsp;&nbsp;Italy&nbsp;&nbsp;
! &nbsp;Greece&nbsp;
! &nbsp;&nbsp;Spain&nbsp;&nbsp;
|-
| &nbsp;&nbsp;&nbsp;&nbsp;(g&nbsp;-&nbsp;r) &nbsp;2003-2007
|align="center"| -0.2
|align="center"| 2.2
|align="center"| -0.7
|align="center"| 3.9
|align="center"| 1.7
|-
|&nbsp; &nbsp;&nbsp;(g&nbsp;-&nbsp;r) &nbsp;2009-2011
|align="center"| -3.3
|align="center"| -5.3
|align="center"| -3.6
|align="center"| -6.0
|align="center"| -2.3
|-
| Budget adjustment to achieve sustainability (% of GDP)
|align="center"| 3.1
|align="center"| 7.5
|align="center"| 2.9
|align="center"| 9.9
|align="center"| 4.0
|}


Source: Cinzia Alcidi and  Daniel GrosIs: ''Is Greece different? Adjustment difficulties in southern Europe'', Vox, 22 April 2010[http://www.voxeu.org/index.php?q=node/4914]
{|align="right" cellpadding="10" style="background-color:#FFFFCC; width:40%; border: 1px solid #aaa; margin:20px; font-size: 92%;"
|"''The European Union is something ...
very precious, not only for us in Europe, but also for the rest of the world. Because the European Union is, in fact, the result of a project for peace that brought together nations emerging from the ruins of the Second World War. It was the European Union that united them in peace around the values of respect for human dignity, freedom, democracy, justice, rule of law and respect for human rights.''"


===Policy toward Greece===
:Merci Olsson, of Nobel Med, congratulating President Barroso on the award of The Nobel Peace Prize t the European Union, 12 October 2012.
 
|}
:(a) conditional loans at below the market rate of interest;
:(b)sponsorship of a [[restructure (debt)|restructuring]] of the government's debt;
:(c) [[fiscal transfer]]s from other Eurozone countries to Greece;
- in addition to which the Greek government has the option of
 
Option (a) would result in the Greek government's [[default (finance)|default]] because, without external support, it would not then be able to repay its maturing debt. (Further borrowing would only be possible at interest rates that would be so high that it would make matters worse). There would in principle be a degree of [[contagion (finance)|contagion]] of the problem by any country with large holdings of Greek government bonds (but it appears that no other country is in that position
<ref>See the exposure data from ''Barclays Capital'', reported in ''The Economist'' [http://www.economist.com/node/18867023?story_id=18867023]</ref>). There would also be contagion by some of the other ''PIIGS'' countries because the realisation that they could no longer count on financial support from the Eurozone would prompt investors to demand increased [[risk premium]]s. Some contagion by Portugal and Spain has happened in anticipation of a default.<br>
Option (b)serves to avoid immediate default and may provide the Greek government with a long-term opportunity to return to [[Fiscal policy/Tutorials#Sustainability|fiscal sustainability]], depending upon the terms of the loan.<br>
Option (c) offers a similar prospect, depending upon the terms of the renegotiated debt.<br>
Option (d) could enable an immediate return to fiscal sustainability.<br>
Option (e) can be dismissed because it would be so costly for Greece<ref>[http://www.thetimes.co.uk/tto/business/economics/article3156724.ece Sam Fleming: ''Devastating price of euro failure'', Times, 7 September 2011]</ref>  as to be impracticable.
 
===Eurozone economic integration===
As the crisis spread from Greece to the other [[PIIGS]] countries, there was widespread agreement that a choice would have to be made between the abandonment of the euro and the adoption of the centralised control of economic policy. Support in principle for the latter option was expressed by
[[Nicolas Sarkozy|President Sarkozy]] and [[Angela Merkel|Chancellor Merkel]] in December 2010<ref>[http://www.ft.com/cms/s/0/825119d8-0463-11e0-8a3c-00144feabdc0.html#axzz17mftMHoY Gerrit Wiesmann  and Peter Spiegel: ''Merkel and Sarkozy call for deeper union'', Financial Times, December 10 2010]</ref>, and again  August 2011<ref>[http://www.reuters.com/article/2011/08/16/eurozone-highlights-idUSL5E7JG1YQ20110816 ''Highlights - Merkel, Sarkozy news conference'', Reuters 16 August 2011]</ref>, when they advocated the creation of a "true European economic government" - although they had not reached agreement upon more than a limited initial move in that direction <ref>[http://media.ft.com/cms/1e93f294-c8df-11e0-a2c8-00144feabdc0.pdf ''Letter to President van Rompuy'', Financial Times, 17 August 2011]</ref>. There were mixed reactions from other eurozone countries<ref>[http://www.reuters.com/article/2011/08/17/us-eurozone-highlights-idUSTRE77F55Y20110817 ''Factbox: Eurozone reaction to Franco-German integration push'', Reuters 17 August 2011]</ref> and there is likely to be strong opposition, both to the eventual replacement of government debts by "eurobonds", and to the centralised control of [[fiscal policy]].
 
Default by Greece would create a [[shock (economics)|shock]] to the global financial system, raising a danger of financial [[panic (banking)|panic]], but the amount involved is smaller than was involved in the ''Lehman Brothers'' collapse that triggered the [[crash of 2008|2008 panic]].
The economic impact of the Greek crisis is limited by the relatively small size of its economy. The Spanish economy is much larger, making the possibility of a loss of confidence in its government's debt a greater cause for concern.
 
Two of them - Greece and Ireland - have been given financial support, conditional upon their adoption of deficit-reduction programmes. In neither case has that been followed by an improvement in their [[Credit rating agency|credit ratings]], suggesting that doubts remained concerning their ability  to implement those programmes. Their [[/Addendum#The financial status of the PIIGS countries|current financial status]] remained a matter of concern, on their own account and because of the possibility that the bond market's loss of confidence might spread and affect the fiscal stability  of Belgium and other EU countries. It was suggested that the future of the eurozone was at stake<ref>[http://www.bbc.co.uk/blogs/thereporters/gavinhewitt/2010/11/fear_and_the_euro.html  Gavin Hewitt ''Fear and the euro'', BBC News, 16 November 2010]</ref><ref>[http://www.ft.com/cms/s/0/58ebec36-62aa-11df-b1d1-00144feab49a.html#axzz16ZvOXbKJ  Martin Wolf: ''Eurozone plays "beggar my neighbour"'', Financial Times, May 18 2010]</ref> (even in 2009, before the eurozone crisis had gathered strength, the Managing Director of the International Monetary Fund was warning that "most advanced economies will not accept any more [bailouts]...the political reaction will be very strong, putting some democracies at risk"<ref>[http://business.timesonline.co.uk/tol/business/economics/article6928147.ece Angela Jameson and Elizabeth Judge: ''IMF warns second bailout would "threaten democracy"'', Times, November 23, 2009]</ref>). If the euro were allowed to collapse, however, it has been estimated that reversion to national currencies would be followed by devaluations that would cost British, French and German banks about €360 billion<ref>[http://www.guardian.co.uk/business/marketforceslive/2010/nov/25/banks-lower-euro-worries Arturo de Frias, quoted in the Guardian blog Posted by Nick Fletcher on 25 November 2010]</ref> creating a [[supply shock]] comparable to the collapse of the ''Lehmans Brothers'' bank that had triggered the [[Great Recession]].
 
 
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Latest revision as of 04:28, 22 November 2023


The account of this former contributor was not re-activated after the server upgrade of March 2022.


Index and Glossary

There is an index to the topics dealt with in the economics articles here, and a glossary of economic terms here.

See also the index to the politics articles .

methodology

"The European Union is something ... 
very precious, not only for us in Europe, but also for the rest of the world. Because the European Union is, in fact, the result of a project for peace that brought together nations emerging from the ruins of the Second World War. It was the European Union that united them in peace around the values of respect for human dignity, freedom, democracy, justice, rule of law and respect for human rights."
Merci Olsson, of Nobel Med, congratulating President Barroso on the award of The Nobel Peace Prize t the European Union, 12 October 2012.
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