The Impact Euro Debt Crisis on EU Countries

Austerity measures – are referring to the actions taken by the government, during adverse economic periods in pursuance of reduction of the deficit in country’s budget with a combination of tax increase and spending cuts. Such actions were taken by most European countries that had deficit in their budget, thus trying to stabilize their economic state after Euro Debt Crisis.

French President Francois Hollande in order to create economic stimulus applied austerity by cutting spending on national defense, public spending, pensions and raising the taxes. Such exercise on the French citizens and business raised an uproar, as it resulted in difficulties for individuals that were relatively close to poverty level and had hard time to meet their ends.

There is now clear evidence that complicated economic situations had impact on the mental health, older generation that were closer to reaching the pension age, increased their chance to feel depressive symptoms (Stuckler, Reeve, Loopstra, Karanikolos, & McKee, 2017).

Similar sanctions were imposed in number of other European countries that echoed with the same reactions as of French people. Furthermore, it was questioned whether such actions like steep tax increase and relatively modest spending change wouldn’t result in conceivable negative impact for the projected GDP growth of those countries. The main reason why actions regarding austerity are not supported by the majority is the short-term approach towards practices of the country that society usually takes (Pettinger, 2017). The promises of the government to stabilize country’s economic position while using austerity practices sound not convincing, thus leads to pessimistic treatment of such practices, as it does not result in beneficial impact for society in short-term. In addition, reforms had an impact on few important sectors of the country, as for example, expenditure cuts were executed in health care and educational areas, which can theoretically allow government to improve the situation of country’s budget, as these sectors are highly dependent on funding of the country, but are most likely to result in negative impact on citizen’s morale and trust in government’s actions (Busch, Hermann, Hinrichs, & Schulten, 2013).

Variety of cuts for employers and employees with raising taxes brought yet unheard phenomena for countries that struggled after European Debt Crisis – working poverty. While this sounds quite negative, why were the countries doing it? Probably, the only answer to this question is there was no other way. European Union had set Maastricht Criteria before the crisis that stated sanctions to the countries that had violated them and, for example, had a negative debt-to-GDP-ratio. Even such powerhouses, as France and Germany didn’t see the other way of compelling with such sanctions after European Debt Crisis hit, than disobedience of rules established in Maastricht Criteria.

Countries like Portugal, Italy, Spain and Greece where economic slump was the harshest, naturally had to cut their spending the most. This resulted in new borrowing regulations and ratios that led to even greater stagnation on economy and GDP growth. While beforehand mentioned cuts in employment sector resulted in highest unemployment rate of 11 percent the unemployment in countries, which were struck by the Economic crisis the most experienced even greater percentage of unemployed people. These numbers were even more staggering in youth unemployment particularly in Greece and Spain, where even up till this day around 40% of youth is jobless (Norman, Uba, & Temple, 2015). Furthermore, wages have been cut by 5 to 10% in countries that held austerity policy.

Although, even after such negative results in most of the countries, austerity policy was continued. Generally speaking, governments with help from European Union understood that Crisis has long lasting effect on the economy and there is no immediate way to solve the problem. Thus, even clearly knowing the consequences of austerity policy to the short-term well-being of the countries and their citizens, it had to stabilize the situation in the long-term. After almost decade past after European Debt Crises and almost as many after austerity policies were put in action, most of the countries managed to stabilize their economies or even experience growth. The only country that still has austerity policy is Greece, their situation is probably worst, considering the process of recovering. Thus, all in all it seems that European Union did a good job helping local governments get their countries “back on track”, although some consequences might still pop out in the future. It is probably safe to say, that it was the most effective way to handle the crisis.

Finally, since it impacts majority of the people, trust and transparency are the key factors to gain supports and understanding from the society. As examples of Greece and Spain had shown, if austerity policy is not being effectively used, it can have long lasting economic impact on the country and affect GDP growth.