However, the outbreak of the European sovereign crisis changed all that

Posted by juicecap on November 25th, 2020

Map of Greece in the global economy had only a tiny part, the normal time, most people do not pay attention to this has been the birth of the Minoan civilization and the Mycenaean civilization, the country in the end what happened.

However, the outbreak of the European sovereign crisis changed all that, although the EU and Greece to accept the joint IMF assistance for several months have passed, but investors still pay close attention to what happened in this country, because what happened in this country would be a good example, tells us that large-scale tightening of fiscal policy in the end in terms of what it means for the economy.

From the data, Greece is caught in another there is no doubt a serious economic recession (or recession in this country did not come out from them). Greek third quarter GDP shrinking by 1.3% qoq (in the second quarter fell 1.7% qoq in the first quarter fell by 0.6% qoq), reaching 4.6% year on year decline.

Private consumption became the hardest hit by the recession, accounting for 70% of GDP, private consumption up to the third quarter, shrinking by 1.8% qoq. The first quarter of this year, Greece was the rapid growth of private consumption, and then with the European sovereign debt crisis, the Greek large-scale financial crunch, the personal consumption began to decline significantly. Can be expected, the Greek private consumption will continue to shrink.

Shrinking private consumption imports hit Greece, the Greek chain the third quarter of imports fell by 7.5% (as exports fell only 6.2% qoq, in fact, but net imports of data on the GDP has a positive contribution to the chain).

This is what happened in Greece, this situation may appear in any of the weak economy and fiscal restraint are implementing large-scale state.

This is why the U.S. Democratic and Republican policy in extending the tax cuts when the agreement the performance of the stock market is so positive. IHS Global Insight economist also so the U.S. economic growth expected next year from the original 2.4% to 3%.

Then this may not enough to prove the choice of the United States better than Greece.

There is no doubt that Greece chose this path is not entirely voluntary. Appeared in this country sovereign debt crisis, the financing costs soared, Greece had to help the EU and the IMF, and financial constraints will be imposed as a condition of assistance to this country, Ireland also has a few months later the same " encounter. "

Greece may have no choice, but the U.S. is different. The financial position of the United States is also widely criticized, but the U.S. government is still very low interest rates can market financing, Treasury auctions still have multiple times oversubscription. The choice is to extend the U.S. tax incentives to maintain a very unstable economic growth. While the politicians vowed that maintaining economic growth is the best way to maintain financial stability, but still a lot of people worried plastic bottle handle about the U.S. financial crisis will evolve to out of hand.

Everyone that fiscal restraint is a national government should do, but the choice of method may be different.  people often say that the short length of pain than the pain (if that approach is short-term pain of Greece, while the U.S. is a long way to pain), but the financial issue is really longer than short-term pain pain may be only time will tell. But also for bond investors, equity investors or investors in commodity markets, the answer is completely different meaning.