Question

1. What are the benefits and costs of using a common currency for Greece, Germany, and the EU?
2. How do the austerity programs imposed by the bailouts help a Greek firm that exports olive oil?
3. While Greece needs help, the German economy has also suffered a major recession itself and a budget deficit. How would you advise the chancellor: to bail out or not to bail out Greece? As a German taxpayer, are you willing to pay higher taxes to help Greece? (Bear in mind, after Greece, there will be Ireland, Portugal, and possibly Italy and Spain.)
4. For the €750 billion European Stability Mechanism, even Sweden and Poland (EU members that do not use the euro) felt they had enough at stake to contribute. But Britain (another EU member that does not use the euro) decided not to contribute any funds. As a British official, how do you defend this decision?

In May 2010, Greece suffered from an economic collapse, which brought the biggest bailout in EU history. The €110 billion ($146 billion) bailout loan was jointly funded by the EU and the IMF, and the harsh medicine associated with the rescue dictated that the Greek government unleash sweeping reforms to put the country's financial house in order. Public sector pensions and wages were cut 15% to 20%. Valueadded and excise taxes were raised twice in 2010.
Such shock therapy generated widespread misery and protests. Yet, the Greek government, led by the American-born prime minister George Papandreou, who came to power in 2009, stood firm. The prime minister argued that Greece must "bite the bullet" to avoid the totally tragic ending of this tragedy, such as sovereign debt default (known as national bankruptcy in layman's terms).



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