INTERNATIONAL BUSINESS SCHOOL, BUDAPEST 2013

MSC IN INTERNATIONAL BUSINESS

Business and its environment

Individual Home Assignment

Critically review the handling of the crisis by the IMF and the EU in the case of Greece.

Prepared by: Gritsenko Anastassiya

Table of contents

Introduction 3

The main aspects of the financial crisis in Greece 4

The European Union is the main initiator of moneyed assistance 5

The International Monetary Fund as a trustworthy buoy of Greece. 6

Conclusion 8

References 9

Introduction

It is generally agreed today that the beginning of a crisis situation in any country has grave consequences with the result that many innocent people in the community, composed of a large amount of law-abiding citizens, doing everything in their power to maintain economic equilibrium and financial stability in the country and discharging their obligations including realization of production works and payment of taxes and other necessary payments to country’s budget, are hard hit by the existing situation most of all. At the same time people do not think about the problems that as a matter of fact have been hidden from human eyes for years.

Let us start by examination and an in-depth analysis of the recent crisis situation taking place in Greece, which has been in the European Union (EU) for quite a long time that means a stable position in the different spheres of activity from economics and political to cultural and entertaining processes. In that case, we have a huge number of contentious questions that must be reasoned:

How does country deal with such a wide-ranging disaster on its own? Or country has rescuers and benefactors, who are extending a helping hand to it at any hard moment.

Undoubtedly, the answer is evident, that it is extremely impossible to scramble out of the crisis without assistance, so humanity really needs the existence of assistance. Next we are talking about miserable situation in Greece as a case in point to confirm some important arguments.

This essay has as its main object to examine thoroughly the effects used by the European Union and the International Monetary Fund (IMF) and to determine the pros and cons of their assistance. Is it necessary to interfere in the internal affairs of other countries? This number of key issues arises from the statement. For example, why did Greece collide with stalemate, in spite of having absolutely fitting level of life? And how exactly did these two international organizations make an impact on the existing situation if countries extreme need financial aid? All of these answers have an exact confirmation. As of today these questions are relevant as never before. Recently, there have been discussions about the effectiveness of various tools used by these organizations for countries in need.

The main aspects of the financial crisis in Greece

Let me start my work with the brief information about Greece for further define the importance of international organizations. As is well known that Greece is one of the most beautiful countries in the Europe with interesting history, but all is not good as it seems. Nothing boded trouble. Besides, economic activities had shown quite a good state in the country. According to all available information, quite the contrary entry into the European Union had been predicted a prosperous and rich future.

The first thing that needs to be said about Greece is what was at the bottom of the economic crisis in Greece, which brought to stability loss to a great extent not only in Greece, but in all Eurozone countries, including such a world power countries. (Carpenter and Dunung, 2011). Let’s start with the first wave of the crisis beginning in 2010 and fluently growing into the second wave in 2011, which has been continuing to the present day, but without so much evident impacts on the economic situation within the European Union.

(Baetz, 2013). The main cause of the crisis was the opening of the huge opportunities to country to use an international lending. In this situation, Greece took occasion and began to borrow a considerable quantity of money without the following repayment. I have heard an opinion that it was hasty actions for Greece and I think it is true. We live in a world, in which in the view of economics, this situation demonstrated absolutely negative solvency. As a result of this, the national debt had begun to rise sharply due to irrevocable damages to cash assets. Finally, it had reached the maximum summit and equaled to about 365 billion euro that was in excess of planned rate. (Morley, 2011) In other words, Greece was unable to rid itself of debts to creditors. Many people may ask the question: for what purpose did Greece take such a fabulous sum of money, although the government had known about lack of financial resources? The answer had been hidden from the audience for a long time. I am completely sure that it was initially obvious all the consequences for the government.

In the end, the present situation is being developed in the following way: a lot of rescuers had appeared on the scene in the person of leading member-countries such as Germany, France, China and both international organizations known as European Union and the International Monetary Fund that should be given consideration at a later time. To say the truth, I cannot understand completely what their interests are and what ulterior motive the representatives follow is. The overwhelming number of respondents inclined to believe the right step for all, is the immediate exclusion of Greece from the Euro zone, thereby get rid of weak link, which pulled economic processes down once and for all. But this trend of events was not part of their plans. Now it is obvious for me that the main aims of these international organizations arise out of the following:

Firstly, their help is accompanied by economic assistance in momentous decisions of currency problems. Secondly, they undertake a task to stabilize the financial system by force of using different tools of impact. In the following parts we are going to talk about the further Greece plans concerning the financial crisis starting in 2010 and continuing to the present day and the approach to this situation from the direction of IMF and the EU.