Briefly describe the current crisis in the Eurozone. Discuss its potential effects on European integration and theorize as to how to overcome the crisis. Country
| CIA 2007
| OECD 2009
| IMF 2009
| CIA 2009
| EuroStat 2010
Greece's debt crisis came to a head because of its massive spending and consumption, coupled with increased wages and government benefits, in the years following its adoption of the euro. In November 2009, it was revealed that Greece had manipulated its balance sheets prior to the global financial crisis to hide its debt. As a spring 2011 report by George Mason University's School of Public Policy summed up: "The roots of Greece's fiscal calamity lie in prolonged deficit spending, economic mismanagement, government misreporting, and tax evasion." In May 2010, the European Commission, European Central Bank, and IMF held an emergency meeting to address Greece's burgeoning debt crisis, which resulted in the creation of a temporary bailout fund called the European Financial Stability Facility. Following its inception, the EFSF helped to provide Greece with a $163 billion loan in exchange for assurances that the country would implement strict spending cuts and tax hikes. By 2011, after three credit rating agencies downgraded Greece's debt to junk status, it was clear that Greece was struggling to implement EU-IMF-mandated budget cuts and privatization plans. In October 2011, with Greece again on the verge of default, German Chancellor Angela Merkel and French President Nicolas Sarkozy engineered a three-pronged rescue plan to provide Greece with a second bailout package worth approximately $178 billion. Unlike the original bailout, the deal included a "voluntary" write-down by private holders of Greek debt. However, the budget cuts mandated by the agreement triggered a political crisis in Greece that led to the resignation of Prime Minister George Papandreou and the formation of a so-called technocratic government of national unity. In February 2012, Greece's new prime minister, Lucas Papademos, pushed a new round of deeply unpopular austerity measures through parliament, paving the way for the implementation of the new bailout. Still, an increasing number of analysts and policymakers doubt that the rescue will be enough to set Greece on the road to fiscal soundness. The IMF, for one, has called on Greece's official creditors, including Germany and the ECB, to also take losses on their holdings of Greek debt. Unlike Greece, Ireland's debt crisis was spurred by a bank default crisis, a result of its housing bubble collapsing in 2008. In the wake of the global financial crisis, the Irish economy experienced one of the most severe recessions in the eurozone. According to the George Mason report, Ireland's output decreased by 10 percent between 2008 and 2009, while unemployment increased from 4.5 percent in 2007 to nearly 13 percent in 2010. Ireland's government took on massive liabilities to support its financial system during the global crisis. In December 2009, the country's finance minister announced a budget-reduction plan following warnings from the...
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