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Economic Recovery of Greece - Research Paper Example
Author : bhirthe
Finance & Accounting
Pages 6 (1506 words)
Reasons Why the European Central Bank (ECB) Should Keep the Interest Rates Low in Order to Help Greece Institution’ Name Name of Institution Introduction According to Stein (2011) Greece’s economy was the strongest and fastest developing in the European zone…
The state made efforts to keep the economy going by spending a lot which consequently increased the country’s debt level in the eurozone. Further efforts were made to reduce the impact of the economic crisis where the Greek State borrowed a loan of €45 billion on 23 April, 2010 from the European Union and the IMF. This was in attempt to cater for its financial requirements for the remaining period of 2010. Their efforts were futile as standard and Poor’s cut the country’s debt rating to junk status a few days after acquiring the loan. The move was in fear of a possible default by the country where the investors were likely to lose 30-50% of their savings. As a result the securities market in the world and the entire euro currency went dipped low in reaction to the S & P downgrade (Stein, 2006). Below is an explanation as to why the European Central Bank must keep the level of interests low with the intention of rescuing Greece. Justification as to why the interest rates must be kept low to help Greece The lowering of the interest rates will give some relief to Greece particularly with its delicate Southern tier. The banks in Greece will eventually borrow heavily from the European Central Bank since the bank will find it difficult to hold more cash in the central bank when borrowing is low. ...