The Rationale For Austerity Programmes On Sovereign Debt And Discuss How Far These Have Been Successful

1433 Words3 Pages
bulb-icon

Recommended: The euro-zone crisis

“Explain the rationale for austerity programmes to reduce sovereign debt and discuss how far these have been successful.”
Introduction
Government debt is nothing new, all countries have some amount of debt, its only when the government can’t pay the interest, it turns into deficit and create crisis. This essay is going show what are government debts, main cause of them and how can it can be reduced. Its also reflects on how some countries fared during similar situations.

Definition of government Debt
What a government borrows to ensure it can finance all its planned expenditure (and plug its budget deficits). If a government is running a budget surplus, it should not in principle need to increase its debt. A government will normally borrow by issuing bonds and other securities. (Ft. 2015)
“GDP is the most important concept of national income is Gross Domestic Product. Gross domestic product is the money value of all final goods and services produced within the domestic territory of a country during a year.” (Thapa.R)
C+I+G+(X-M) = GDP
Where,
C is consumption
I is Investment
G is Government
(X-M) is export minus import.

Government
Government is important factor for how well the economy does, because government creates laws and policies which should be followed by all, then these polices result to good/ bad of the economy. Such as unemployment, inflations, rate of the economic growth and the balance of payment.

Many countries in the Europe are in budget deficit, which only happens when the government spending is greater than their revenues. This over time has accumulated more and more debt. If the government are not able to pay back this may lead to default.
Main causes of government debt
1. High structural debt befo...

... middle of paper ...

.... Like USA can print their own dollar bills and Britain has huge control over their interest rates while many other countries don’t enjoy that freedom.

Conclusion
Countries with sovereign debt can successfully get out of deficit and escape default, but these all cannot be specified with one formula nor does it have one answer, it’s a combination of many factors such as the current financial environment, since we part of a global village each and every country place a big part on current and future economic situation of the country. Sovereign debt can be avoided by constant evaluations and reforms in economic laws and policies. Government plays a key role in these economics situation but I also believe financial institution and business play an important role as well. The deficits can be avoided but many factors go into making the economics growth sustainable.

Show More
Related

  • The Changing Economy: 1865-1939

    637 Words  | 2 Pages

    From the Civil War to the end of the Great Depression the United States economy went through many levels of economic, political, and social success and failure. Without the government stepping in to make regulations the country would have never been able to climb out of the plague of the Depression under Individualist means.

    Read More

  • The U.S. Free-Enterprise Economy

    788 Words  | 2 Pages

    This is why regulating money, trade, and the economy is an important part of government tasks. In the end, citizens want the best policy to promote the U.S. into a stable and secure economy.

    Read More

  • Comparison Of Bill Clinton And Ronald Reagan

    1102 Words  | 3 Pages

    economy is one of the major things that determines the power and the strength of a country.

    Read More

  • Macroeconomics In Unemployment

    1233 Words  | 3 Pages

    Gross domestic product (GDP) is one of the best ways to measure how a country’s economy is doing. A main component in figuring the GDP is personal consumption expenditures. Personal consumption expenditures accounts for about two-thirds of domestic

    Read More

  • The National Debt

    1565 Words  | 4 Pages

    The US has been in and out of debt countless times throughout history, going as far back as the Civil War. However, debt did not become a truly relevant problem until much later, in the 1980s (Budget Deficits). Up to that point, large budget deficits were generally only allowed during wartime, but this pattern ended after the Great Depression. Roosevelt’s New Deal meant that the government spent much more than it previously did, even after the economy improved (Budget De...

    Read More

  • What Is The Theme Of The Debt In Hamilton's Blessing

    835 Words  | 2 Pages

    The national debt is usually a frightening topic citizens of any country, however, in the United States, twenty trillion dollars of national debt is one of the major fears of the economy. Along with this fear comes every politician claiming to be the person to lower this astronomical debt to ease concerns in the modern American economy. In Hamilton’s Blessing, John Steele Gordon tries to alleviate these concerns by showing a plethora of benefits and good the debt has been able to do throughout the history of the United States. The central premise of the book and the main guideline for John Steele Gordon’s thinking is that the debt was used to save the Union in the 1860’s, the American economy in the 1930’s, and the wellbeing of mankind during

    Read More

  • Analysis Of Harrods

    2835 Words  | 6 Pages

    The government plays a vital role in making business policies. For example, the UK government in 2014 budget the government has introduced a rise of 40% in the tax. As a consequence, the lending interest rate falls but the taxation is still high. Since 2010, the growth of GDP in UK was at -11% and by 2013, the GDP growth was at -6.6%, this is a good indication though it is at slowest rate.

    Read More

  • National Debt Essay

    1380 Words  | 3 Pages

    In general, an increase in government spending and decrease in the collection of government taxes and other receipts, increases the debt held by the local government. Government taxes and receipts fluctuate annually, and are frequently less than government spending. In the past, the U.S. public debt has increased for the duration of wars and recessions. When the government consumes more than what it accumulates in taxes, there is a budget deficit and the government then borrows from the private sector or from foreign governments to protect their spending. The compilation of historical borrowing is what materializes the government debt.

    Read More

  • The United States National Debt

    820 Words  | 2 Pages

    Public debt, which comes from securities and bonds issued by the United States Treasury, is responsible for over 60 percent of the debt (“Debt Position and Activity Report” 1). These debts are being held by the public inside and outside the US. Over 25 percent of the debts are held by foreign governments, in which China and Japan accounts for almost half of the sum (“Treasury Bulletin: September 2009” 60).

    Read More

  • Summary: The 2008 Financial Crisis

    886 Words  | 2 Pages

    Revival following the crisis just when the vulnerabilities in the financial sector have been addressed without endangering the fiscal sustainability. The crisis resolution actions generally involve costly government reorganization of private sector’s and the financial sector’s balance sheet. This can have a long-term negative effect on the public debt levels. Besides,

    Read More

  • Why Canada is a Great Place to Live

    388 Words  | 1 Pages

    GDP measures the total value of all goods and services produced within that territory during a specified period. GDP is used to measure a country’s wealth. Basic’s of life, food, etc. shelter and clothing is not likely available to most people in poorer countries. The.

    Read More

  • The Greece Debt Crisis

    3195 Words  | 7 Pages

    Historically, financial crises have been followed by a wave of governments defaulting on their debt obligations. The global economic history has experienced sovereign debt crisis such as in Latin America during the 80s, in Russia at the end of the 90s and in Argentina in the beginning of the 00s. The European debt crisis is the most significant of its kind that the economic world was seen started from 2010. Financial crises tend to lead to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt, pushing many governments into default. Greece is currently facing such a sovereign debt crisis and Europe’s most indebted country despite its surplus in the early 2000s. Greece accumulated high levels of debt during the decade before the crisis, when the capital markets were highly liquid. As the crisis has unfolded, and capital markets have become more illiquid, Greece may no longer be able to roll over its maturing debt obligations. Investment by both the private and the public sectors has ground to a halt. Public sector debt has increased substantially as the state had to rely on official assistance to payroll expenses, fiscal deficit and fund social payments.

    Read More

  • Macroeconomic Objectives Essay

    1754 Words  | 4 Pages

    In my opinion, the most important aspect is that government should consider the importance of the government macroeconomic objectives goals and which government should priority first. This will be an easier way for government to allocate the resources and help to focus the government macroeconomic objectives

    Read More

  • The Pros And Cons Of Inflation

    853 Words  | 2 Pages

    National debt is the total outstanding amount that the central government has borrowed from national creditors (internal debt) and foreign creditors (external debt). Whenever the government spends more than it receives in taxes, it adds on to the debt. There has been a lot of debate on whether the government should raise taxes or cut spending. Either way slows economic growth, both can cause consumers to spend less. Raising taxes mean goods are more expensive and consumers are unwilling to pay, cutting spending means that goods that were once free of charge may

    Read More

  • Effects Of Inflation Essay

    1615 Words  | 4 Pages

    The Gross Domestic Product (GDP) is the total market value of in a country’s output. The GDP is the total market value of all final goods and services produced by factors in within given period of time that located in the country doesn’t matter they are citizens or foreign-owned companies. Hence, the GDP is the best way to measure the country economy.

    Read More

More about The Rationale For Austerity Programmes On Sovereign Debt And Discuss How Far These Have Been Successful

Open Document