Growth would lower Greeces debt and deficit levels aspercentage of GDP make

Growth would lower greeces debt and deficit levels

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growth in the Greek economy. Growth would lower Greece’s debt and deficit levels as a percentage of GDP, make investors more inclined to resume lending to Greece, and offset the contractionary effects of fiscal reforms, making them more politically palatable. However, fostering short-term growth in the Greek economy has not been a central feature in the policy response to date, and growth in the economy is proving elusive, with the economy contracting at a faster rate than expected. Continuously After six years of recession, Greece returned to positive growth rates (+0.4%) in 2014. However, this trend was interrupted in 2015 and the economy ended the year with a recession of -0.2% following Greece’s near default in summer 2015. The protracted economic crisis led to a contraction in bank lending, project development, and investment. Business confidence dropped sharply during the crisis. In 2016 the economy contracted the first two quarters but ended flat (0% growth). Although, the economic sentiment improved slightly in May 2017 as a result of the preliminary agreement between the government and its creditors, economic activity remains low, as well as the investor and consumer confidence. Current GDP growth rate is 1.4%. Growth is proving difficult because austerity measures have depressed domestic sources of growth. Moreover, Greece cannot easily rely on exports for expanding its economy. As a member of the Eurozone, it cannot depreciate its currency against its major trading partners to help spur exports. Why the policy responses to Greece’s debt crisis failed to put a stronger “firewall” around the country and prevent the spread of the crisis? Some fault European leaders for failing to act decisively during the crisis. It has been argued that their slow, piecemeal approach to the crisis response, and public disputes about appropriate crisis response measures, have exacerbated investor anxiety rather than reassured markets. It may also be the case that the crisis spread not because of what was happening in Greece per se, but simply because other Eurozone countries faced fundamental fiscal challenges that were unsustainable. For example, Spain suffers from a serious housing bubble; Ireland, a bloated banking sector; and Portugal, a decade of anaemic growth. 14
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Eurozone/IMF Financial Assistance to Greece On May 2, 2010, Eurozone finance ministers and the IMF agreed on a three-year program of loans to Greece totaling €110 billion (about $145 billion): €80 billion (about $105 billion) from Eurozone member states and €30 billion (about $40 billion) from the IMF. The package could reportedly provide €30 billion (about $40 billion) from the Eurozone and €10 billion (about $13 billion) from the IMF in 2010 to help ensure that Greece meets its immediate payment obligations. Details on Eurozone Member State Assistance to Greece Over the course of March and April 2010, Eurozone leaders incrementally formulated a mechanism for providing financial assistance to Greece. After considerable negotiation, leaders agreed that the Eurozone countries would provide bilateral loans, at a market-based
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