Abstract
Certain EU countries could not counter the effects of the 2008 global financial crisis. As a result, they lost access to international markets. The EU attempted to resolve the European financial crisis by implementing economic adjustment programmes. Economic adjustment programmes included financing conditional on the implementation of reforms. All programmes consisted of three main pillars: Fiscal consolidation, financial stability, and promoting growth and competitiveness. This article examines whether the objectives set under each pillar were in conflict with or complementary to the objectives set under other pillars. Studying the case of Greece, it is concluded that certain economic adjustment programme objectives and policies were indeed conflicting, rendering their implementation harder.
Highlights
Economic Adjustment Programmes (EAPs) were not known in the EU. They are usually implemented in developing economies, producing questionable results, while they seem to have a negative impact on social policy [1] [2] [3]1, as was the case in Greece [4] [5] [6]
Special emphasis should be placed on designing consolidating packages that consist of well-planned adjustments that could faster stabilise the debt ratio [20], as the EAP failure or success depends on domestic policies and economic circumstances [21]
EAPs have a negative impact on economy due to austerity as fiscal consolidation has higher cost for GDP during a recession [22], but they are linked to positive structural reforms [23]
Summary
Economic Adjustment Programmes (EAPs) were not known in the EU They are usually implemented in developing economies, producing questionable results, while they seem to have a negative impact on social policy [1] [2] [3]1, as was the case in Greece [4] [5] [6]. Cyprus lost merely 5% of its GDP, compared to Greece losing 22%, as Cyprus suffered a smaller crisis and accelerated the implementation of the programme Both countries continue to face significant issues, such as high public debt and NPLs [19]. 1) Public debt as a percentage of GDP; 2) Total government revenue in million EUR; 3) Total government expenditure in million EUR; 4) Fiscal balance as a percentage of GDP These ratios are constantly used as a measure to evaluate the implementation of the fiscal consolidation reforms in all economic adjustment programmes and in all reviews.
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