Business: International Business
International Business: Business
The IMF often provides financial assistance to ailing economies after a crisis to enable them return to their pre-crisis levels of income. However, whether or not these bailout programs are able to achieve this objective is dependent on a number of factors. This text reviews the recovery processes of four European countries to obtain a view of what these factors are.
Currency Conversion
dollar = 102.28 Japanese Yen (¥); 0.75 Euros (€); and 0.6 British pounds (£)
Converting $1,500 into:
Japanese Yen
=$1,500 X 102.28
= ¥153,420
Euros
= $1,500 X
= € 1,125
British Pounds
= $1,500 X
=£ 900
What is the price in U.S. Dollars of purchasing:
A computer costing ¥167,000
= ¥ 167, 000/¥102.28
= $1, 632
Euro desks/chairs costing €1, 125
= €1,125/€0.75
=$1, 500
iii) Printer costing 575 Pounds
= £575/£0.6
=$958
Part Two: Effects of the Global Financial Crisis on European Economies
The financial crisis that hit the American economy between 2007 and 2008 spread far and wide, and continues to have an adverse effect on other economies around the world. Most economies experienced huge slumps in incomes and significant increases in unemployment as a result of the crisis. The International Monetary Fund (IMF) moved in to prevent the major economies of the world from collapsing. Countries, however, reacted differently to these bailout programs, with some recording improved economic conditions, and others recording only very negligible change. The subsequent sections explore the recovery processes encountered by four major economies in Europe - Greece, Iceland, Ukraine, and Hungary -- as a result of the IMF's assistance. They examine how GDP, inflation, and unemployment levels in these countries changed as a result of the IMF's bailout program.
Greece
The Greek economy...
Beginning way back in 1981, the economy was characterized by ineffective expenditure programs with excessive expenses that increased the public debt and budget deficit without producing any tangible effect on revenues (Podaras, 2012). The financial crisis only worsened this situation, with the economy recording a budget deficit of 12.75 of GDP -- four times the Euro Zone limit, and a public debt of $410 million in 2010 (Podaras, 2012). This led the Euro Zone countries to approve a 110-billion rescue package from the EU and the IMF to bailout Greece and prevent it from defaulting on its debts (Podaras, 2012). Moreover, the countries speeded up efforts to have Greece implement its austerity plan, which was geared at getting budget cuts of 30 billion Euros and reducing the country's public deficit to less than 3% of GDP (Podaras, 2012). The country was as a result forced to implement budget cuts including discarding increases in public sector salaries for the three years covered in the plan, dismissing holiday bonuses for public sector workers, and scrapping bonus payments. Moreover, it began taxing illegal constructions, and at the same time raised value added tax, sold public assets, and increased taxes on tobacco, alcohol and fuel (Podaras, 2012).
The rescue program, however, did more harm than good -- the country's growth was weakened, and government spending reduced by millions of dollars in a country whose economy was already ailing. Private businesses fired workers and some closed down, causing unemployment levels to rise significantly, hitting around 16% in 2011 (Podaras, 2012). Moreover, consumer and business spending fell, depriving the government of tax receipts (Podaras, 2012). The decrease in tax receipts and government purchases caused GDP to contract significantly (Podaras, 2012). Inflation rose above the European average (Podaras, 2012).
Iceland
Iceland also experienced massive economic changes as a result of the 2008 crisis. It was bailed out by the IMF in the fourth quarter of 2008. However, differently from Greece, Iceland reported positive changes to the economy as a result of the bailout…
