The sovereign debt crisis afflicting Greece has reached a critical stage. Greece has a GDP of approximately $312 billion dollars—about 2% of the European Union’s GDP—yet it has exhausted over $109 billion dollars in bailout funds from the European Central Bank, EU and IMF combined and continues to require loan refinancing and debt restructuring. Greece’s current economic troubles call into question if and how a country with a large public spending problem can be reigned in, as well as what responsibility the EU has or wants to have in ensuring the vitality of that country, as well as the EU as a whole. As a leader of the European Union, I would look at applicable past debt crises like those in Germany and Latin America, as well as analyze the crisis in the context of the current global economy to make my decision on how to handle the impending situation. I would weigh my options and then act quickly to enact a rigid plan with procedures and teeth, and then establish guidelines for the future to prevent future crises.
Past international economic assistance efforts reveal the necessity of cooperation coupled with swift action and the enforcement of austerity measures to solve debt crises. Germany’s reaction to the constraints put on it following The Treaty of Versailles proves that strict debt-punishment without partial debt-forgiveness can lead to chaos. The rise of fascism can be partially attributed to the retaliatory war reparations thrust on Germany following its massive defeat and the isolation and hostility that followed when cooperation faltered. Today, the EU, with its shared common market and currency, is the definition of international cooperation. History has revealed the global reality that one country’s woe is every country’s woe. This was further exemplified on March 9, 2012 when BBC reported that banks and other institutions had agreed to do a ‘debt-swap’ and exchange their existing Greek government debt for new bonds worth significantly less...
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