Mismanagement of Fiscal Policy: Greece's Achilles' Heel
In December 2016, the debt-stricken Greek government announced the distribution of a sizeable "Christmas gift" to its low-income pensioners, a one-time bonus that would cost the government 617 million. This cost was in addition to suspending increases in the value-added tax on some Greek islands. These plans were in clear violation of the terms of a bailout provided to Greece by Eurozone nations in 2015, which required Greece to implement austerity measures and achieve specific fiscal targets. What was the reason for Greece's economic troubles and why did Greece's debt-to-GDP (gross domestic product) ratio climb to its current three-digit figure? Faced with an imminent exit from the Eurozone, how could the country's government solve Greece's longstanding fiscal problems? Tulsi Jayakumar is affiliated with SP Jain Institute of Management & Research.