Saturday, 25 March 2017: 09:20
Economic history, as well as that of the Eurozone, is full of cases of countries experiencing severe economic crises. These crises may have different causes and effects and may be transmitted differently to other countries, but the one that has the most widespread political, economic and social impacts is the recession crisis. As a rule of thumb, a recession crisis is the result of another kind of crisis, such as a country's debt crisis (e.g. Greece, Portugal and Spain), financial and banking crisis, or crisis due to various "bubbles" (e.g. real estate crisis in the United States). In all cases, a number of issues come up with international support to the country in crisis, and the exit-from-recession policies are the most important. Most countries of the world, when facing a deep crisis, resort to the mechanisms of the International Monetary Fund (IMF) for a loan, since the private financial markets are not willing to take on any new risks. However, the economic support of the IMF is always connected with a commitment on the part of the borrower country to implement a severe adjustment program under a Memorandum of Understanding.
The main purpose of this paper is to study the course of a number of countries which were or currently are in crisis and in a supervised adjustment program. The analysis focuses on the causes and the development of the adaptation policy, emphasizing the role of foreign direct investment (FDI) in stimulating the economic activity, and the country's exit from the crisis. The specific questions that will be addressed are:
- Why did some countries exit the crisis and memoranda and others did not?
- How consistent was each individual country in the application of the macroeconomic and reform policies?
- What policies did the countries in crisis use to attract FDI and how did these evolved?
- How did Greece perform and what could be learned from other countries that have managed to leave their memoranda?
JEL Classification: F00