Summary of Implementation of the Macroeconomic Adjustment Programmes in the Euro Area

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The independent Centre for European Policy Studies (CEPS) has evaluated how successful the adjustment programs delivered by the Troika – the European Commission, the European Central Bank and the International Monetary Fund – have been within the crises-afflicted economies of Greece, Ireland, Portugal and Cyprus. The CEPS review of data and scholarship from 2010 to the present shows that Portugal and Ireland, based on export growth, are rebounding; that Greece’s lack of real structural reforms has led to fiscal stability without growth; and that evaluations in Cyprus are still premature. This clear narrative lays out the specifics of these exceedingly complex efforts. Since CEPS has no political skin in the game, getAbstract sees this report as a reliable source of unbiased information on often contentious agendas.

About the Authors

Daniel Gros is the director of the Centre for European Policy Studies, where Cinzia Alcidi is a research fellow and Alessandro Giovannini is a researcher. Ansgar Belke is a professor at the University of Duisburg-Essen and Leonor Coutinho is a research fellow at the Europrism Research Centre.

 

Summary

Macroeconomic Challenges in Four Countries

The chaos in Greece’s public finances in 2010 demanded concerted intervention from a trio of institutions: the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission. As the Troika, they established assistance programs and mechanisms, including the European Financial Stability Facility and its successor, the European Stability Mechanism. Very quickly, the Troika found itself dealing with challenging and discrete financial crises in Ireland, Portugal and Cyprus as well as Greece.

The Troika’s financial help arrived in exchange for the countries’ promises of “fiscal consolidation, governance measures...financial sector stabilization and structural reform.” Each country suffered extreme imbalances in different parts of its economy: For Greece, the problem resided in the public sector; for Ireland, in housing and banking; for Portugal, in its external accounts; and for Cyprus, in banking. High foreign debt, weak rates of personal savings and a lack of competitiveness burdened Portugal and Greece. In Ireland, banking losses – mostly due to a housing bust – were too much for the government...


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