The overall assignment mainly focuses on depicting the relevant roles, which was performed by the International Monetary Fund (IMF) and the European Central Bank (ECB) in resolving the financial crisis experienced by Greece. The overall financial crisis in Greece mainly incurred due to the economic crisis of 2008, which increased sovereign debt of the country. Moreover, relative measures, which was taken by International Monetary Fund (IMF) and the European Central Bank (ECB) is mainly depicted in the assignment. These measures mainly helped in bailing out Greece from the debt crisis and helped in creating the required liquidity in the country.
Both International Monetary Fund (IMF) and the European Central Bank (ECB) mainly performed series of activities, which helped in improving the debt condition of Greece. Moreover, the problems faced by Greece needed the required intervention to control its rising liquidity crisis and debt burden. Eavis (2015) mentioned that debt obligations of Greece mainly went out of control during 2013, where international banks were not able to maintain its liquidity. On the other hand, some researcher criticises that due to the measures taken by IMF for continuously funding Greece with more debt thought 2010 mainly augmented the debt crisis (cfr.org, 2017).
The International Monetary Fund (IMF) and the European Central Bank (ECB) both took relevant measures, which ensured that Greece bailout program was a success. Both IMF and ECB in conjunction with other European countries mainly helped Greece in providing relevant measures, which could be issued in reducing debt of Greece. Wearden, Fletcher, Smith & Allen (2017) stated the European Union designed that Greece bailout programme thrice due to the strict stringent rules lay down. In this context, other researchers further mentioned that the fear of Greece exit from Euro zone and augmenting the financial crisis both IMF and ECB deigned an adequate bailout programme, which was agreed by the Greece government (Accaglobal.com, 2017). IMF and ECB mainly conduct the following roles in controlling the debt crisis and baling out Greece from its financial crunch.
International Monetary Fund mainly played as effective role, where it helped Greece with its debt crisis. Foka (2015) mentioned that IMF has been providing helping hand to countries and financial institution, which are having problems related to its debt. Moreover, International Monetary Fund takes the following measures for effectively supporting Greece with its debt.
International Monetary Fund has been involved in improving relevant relief funds to Greece since 2009. Moreover, International Monetary Fund mainly initiated the bailout program to save Greece. In addition, IMF played a vital role in convincing the Euro zone counties for providing the required level of monetary support, which could be used in balling Greece from the financial crisis. Clements (2017) mentioned that IMF mainly aims in providing monetary support to Greece in times of turmoil. On the other hand, other researchers criticises that due to continuous lending process by IMF, Greece debt rose to alarming rate (bbc.com, 2017). Furthermore, the Greece debt mainly augmented with the first loan, which was provided by IMF. Besides, the crisis mainly started after Greece was not able to pay scheduled debt repayment of about 1.5 Billion Euros to IMF. However, IMF with the help of other European countries and listed group member was able to provide the relative support on debt repayments. IMF mainly helped the European Union to design the most effective bailout plan, which could help in reducing the debt by 50%, while maintaining the level of GDP growth.
International Monetary Fund was the first group to provide unconditional debt relief, which helped in reducing the burden of excessive interest payments. This was mainly conducted to ensure that Greece does no exit the European Union and start the second recession. Mink & De Haan (2013) state that during 2011 IMF funded the first bailout package of €110 billion to Greece for restructuring its overall expenses. In this context, Featherstone (2015) further stated that Germany during the bailout program in 2015 mainly ensured that without the involvement in IMF the support could be doubtful. This mainly indicated that European counties mainly belied the involvement of IMF could effectively help Greece in reducing its debt accumulation and start positive GDP growth. However, the undivided support provided by IMF mainly helped the European countries to bail out Greece from its debt crisis. The unconditional debt provided by IMF mainly ensured Greece to maintain the level of GDP growth. Moreover, IMF and European government has mainly provided a €32 billion bailout package to Greece for reducing its debt and stop financial meltdown.
IMF have been the major player in imposing the stringent fiscal austerity measures, which has been effective in reducing excess expenditure conducted by Greece government. Moreover, the stringent fiscal austerity measures mainly helped in convincing the European countries in providing the relevant bailout fund to Greece. IMF mainly conducts the debt and GDP valuation of Greece and based on that method relevant bailout decisions were taken. Kentikelenis et al., (2014) mentioned that high-end salary cuts and extra taxes on people mainly helped in supporting Greece to reduce its debt. However, Katsanidou & Otjes (2016) mentioned that due to increasing strikes austerity measures were mainly reduced in Greece.
International Monetary Fund from 2013 to 2015 was mainly responsible to monitor the overall progress of Greece financial condition. This mainly helped European countries to initiate the bailout scheme, which in turn allowed Greece to maintain the level of GDP. On the other hand, Piketty et al. (2015) argued that recent studies show that anticipated condition of Greece by IMF was exaggerated and growth in the country has been witnessed. The IMF was mainly responsible to evaluate the stringent austerity measures, which is been continued by Greece during 2013 to 2015. This monitoring conducted by IMF mainly helped Greece to get the bailout package from the European countries and 50% reduction in its bond issue.
European Central Bank has mainly played an effective role in balling out Greece from its financial debt crisis. The ECB has mainly provided Greece with two different loan sanctions, which helped in supporting the overall debt payment to IMF. However, during 2012 the ECB further provided IMF another loan to Greece for restructuring its operations. Those measures did not last and debt of Greece mainly rose of dangerous level, where the whole European Union needed to intervene. Shukla (2016) stated that ECB with its relative measures provided Greece banks and government with adequate liquidity to maintain monetary supply in the country. On the other hand, Ardagna & Caselli (2014) criticises that ECB did not ease the debt of Greece, while providing funds by purchasing large chuck of bonds from the secondary market.
From the start of 2012, where Greece was not able to generate the required funds to maintain its banking and liquidity condition, European Central Bank mainly helped Greece government and banks to maintain the level of liquidity in the country. ECB mainly took relevant measures like starting Outright Monetary Transactions (OMT), which enable the bank to buy bond from the struggling euro zone economies. This move was mainly conducted to help the euro zone countries and save the European Union. Furthermore, ECB mainly instigated to use stringent policies for ensuring the payment of debt from the borrower. However, Beirne & Fratzscher (2013) argued that massive spending conducted by Greece mainly worsen the overall debt accumulation and reduced its ability to pay interest on loan. The introduction of open-ended bond buying was mainly introduced by ECB for ensuing the reduction in decline of Euro valuation. The ECB was mainly acted by thinking about the declining condition of Greece. On the other hand, Eavis (2015) criticises that ECB by helping Greece mainly increased their debt exposure, which in turn burdened the country and hampered payments on the instalments.
The European Central Bank was mainly buying the entire relevant bond both government and corporate, which was been traded in the secondary market. This mainly helped the bank in Greece to acquire the required cash from ECB to maintain its operations. Foka (2015) mentioned that through bond government are mainly able to generate the required cash, which could be used in restructuring the economy. However, Wearden, Fletcher, Smith & Allen (2017) argued that Greece raised the cash from bond to pay its debt, which in turn created more debt, as it did not improve its productivity. This intense buying of bond was mainly conducted to support the liquidity condition of the banks.
The continuous purchase of bonds conducted by ECB mainly allowed the banks in Greece to acquire the required cash, which was been used in calculation. However, due to the negative news about the monetary conduction of the bank rigorous cash withdrawals were mainly conduced from banks, which increased the overall selling of bond and increased debt of banks. Moreover, the initiative conducted by ECB mainly helped Greece in defaulting on ground of non-cash availability. On the other hand, Mink & De Haan (2013) mentioned that increased accumulation of Greece government bonds was mainly conducted due to political pressure, which in turn resulted in high-level resignations. Clements (2017) mentioned that manipulation conducted by ECB mainly allowed Greece to smoothly operate its economy in turmoil conditions
Conclusion:
The overall assignment mainly focuses on the role, which was played by both International Monetary Fund (IMF) and the European Central Bank (ECB) for balling out Greece form the financial debt. From the overall evaluation it could be understood that IMF mainly activities was to prompt other countries to support Greece with the bailout package, which could help in reducing the excessive debt of the country. On the other hand, ECB mainly supported Greece with adequate liquidity to maintain the level of activities in its country. The combinative efforts of both ECB and IMF mainly helped Greece to reduce the impact of financial debt crises and halted the augmentation of a recession. Moreover, IMF also helped in designing three-bailout program for Greece, which helped in maintaining the operational capability of the country. However, after the implementation of bailout, the initial crisis was averted and recession was prevented.
References:
Accaglobal.com, A. (2017). The European debt crisis | ACCA Qualification | Students | ACCA Global. Accaglobal.com. Retrieved 19 March 2017, from https://www.accaglobal.com/in/en/student/exam-support-resources/professional-exams-study-resources/p4/technical-articles/the-european-debt-crisis.html
Ardagna, S., & Caselli, F. (2014). The political economy of the Greek debt crisis: a tale of two bailouts. American Economic Journal: Macroeconomics, 6(4), 291-323.
bbc.com. (2017). BBC News. Retrieved 19 March 2017, from https://www.bbc.com/news/world-europe-17373216
Beirne, J., & Fratzscher, M. (2013). The pricing of sovereign risk and contagion during the European sovereign debt crisis. Journal of International Money and Finance, 34, 60-82.
cfr.org. (2017). Council on Foreign Relations. Retrieved 19 March 2017, from https://www.cfr.org/europe/role-european-central-bank/p28989
Clements, L. (2017). Greece will CRUMBLE under debts – IMF’s damning verdict on eurozone’s austerity targets. Express.co.uk. Retrieved 19 March 2017, from https://www.express.co.uk/finance/city/764152/Greece-debt-crisis-IMF-eurozone-austerity-fiscal-economy-targets
Eavis, L. (2015). As Greece Deadline Looms, European Central Bank Plays Key Role. Nytimes.com. Retrieved 19 March 2017, from https://www.nytimes.com/2015/06/22/business/european-central-bank-plays-dual-role-in-greek-crisis.html
Featherstone, K. (2015). External conditionality and the debt crisis: the ‘Troika’and public administration reform in Greece. Journal of European Public Policy, 22(3), 295-314.
Foka, Y. (2015). The Role of the IMF in the Euro Crisis. Greekcrisis.net. Retrieved 19 March 2017, from https://www.greekcrisis.net/2015/04/the-role-of-imf-in-euro-crisis.html
Katsanidou, A., & Otjes, S. (2016). How the European debt crisis reshaped national political space: The case of Greece. European Union Politics, 17(2), 262-284.
Kentikelenis, A., Karanikolos, M., Reeves, A., McKee, M., & Stuckler, D. (2014). Greece’s health crisis: from austerity to denialism. The Lancet, 383(9918), 748-753.
Mink, M., & De Haan, J. (2013). Contagion during the Greek sovereign debt crisis. Journal of International Money and Finance, 34, 102-113.
Piketty, T., Sachs, J., Flassbeck, H., Rodrik, D., & Wren-Lewis, S. (2015). Austerity has failed: An open letter from Thomas Piketty to Angela Merkel. The Nation.
Shukla, M. S. (2016). The Greece Debt Crisis: Where the World Economies are Heading Up to. Global Journal For Research Analysis, 4(7).
Wearden, G., Fletcher, N., Smith, H., & Allen, K. (2017). Greek borrowing costs rise after IMF reveals bailout split – as it happened. the Guardian. Retrieved 19 March 2017, from https://www.theguardian.com/business/live/2017/feb/07/imf-split-over-greek-bailout-geopolitical-tensions-europe-markets-bonds-business-live
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