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Financial Crisis in the European Union - The Cases of Greece and Ireland [2011]

Financial Crisis in the European Union - The Cases of Greece and Ireland [2011]

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Financial Crisis in the European Union - The Cases of Greece and Ireland
Sara F. Taylor
Thesis submitted to the faculty of the Virginia Polytechnic Institute and State University
in partial fulfillment of the requirements for the degree of
Master of Arts in Political Science
Scott G. Nelson, Chair
Karen M. Hult
Deborah J. Milly
September 7, 2011
Blacksburg, Virginia
Financial Crisis in the European Union - The Cases of Greece and Ireland
Sara F. Taylor
Thesis submitted to the faculty of the Virginia Polytechnic Institute and State University
in partial fulfillment of the requirements for the degree of
Master of Arts in Political Science
Scott G. Nelson, Chair
Karen M. Hult
Deborah J. Milly
September 7, 2011
Blacksburg, Virginia

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Published by: Elder Futhark on Jun 04, 2013
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 Financial Crisis in the European Union: The Cases of Greece and IrelandSara F. Taylor Thesis submitted to the faculty of the Virginia Polytechnic Institute and State Universityin partial fulfillment of the requirements for the degree of Master of ArtsinPolitical ScienceScott G. Nelson, Chair Karen M. HultDeborah J. MillySeptember 7, 2011Blacksburg, VirginiaKeywords: EUROPEAN UNION, EUROZONE, GREECE FINANCIAL CRISIS,IRELAND BANKING CRISIS, EUROPEAN CENTRAL BANK Copyright 2011 Sara F. Taylor 
 
 Financial Crisis in the European Union: The Cases of Greece and IrelandSara Frances Taylor ABSTRACTThe 2008 eurozone financial crisis has only worsened as of summer 2011 raisingquestions about the economic future of the eurozone and sending shock waves througheconomies around the world. Greece was the first state to receive a bailout from theEuropean Union and the International Monetary Fund, surprisingly followed only sixmonths later by Ireland. The goal of this thesis is to analyze the challenges posed tosmaller, weaker economies within the eurozone, specifically Greece and Ireland, sincethe recent eurozone financial crisis. This study is based on the experiences of both Greeceand Ireland as very different members of the single currency. How and why did thesestates meet the criteria for euro convergence? To what extent was there support for theeuro in both countries in the past? To what extent is there support today after the near collapse of both economies and the rescue packages brought about by the EU?As a result of the recent financial crisis, Greece and Ireland are facing difficultieswith the terms of European economic and monetary union. Since these smaller economies are, among other reasons, unable to devalue the currency in order to regaineconomic competitiveness as members of the single currency, they are recognizing thatthe eurozone’s economic structure may not adequately address their national economicvulnerabilities during times of crisis. Because of this and the worsening economicconditions in both Greece and Ireland in 2011, I hypothesize that these states are“fraying” the edges of the eurozone, or increasingly degrading the eurozone’s specificeconomic relationships, and demonstrating this through a growing skepticism of theeconomic benefits to smaller, weaker economies as members of the eurozone.Additionally, citizens of both states are indicating this skepticism by increasinglyseparating from the parties and policies that support eurozone membership in their states,as demonstrated by the political shifts in each state since the crisis began. In order tostudy the phenomenon of “fraying” and address the question of the challenges posed tothe smaller, weaker economies and their incorporation into the eurozone, I analyzed theeffects of the debt crisis in Greece and Ireland in terms of the EU/IMF bailouts, theausterity measures each state took in response to the crisis, and the resulting national political changes. I found that neither Greek nor Irish citizens were unequivocallygrowing skeptical of their membership in the single currency. In fact, citizens in bothstates still support the idea of the euro. However, there did appear to be a certain elementof dislocation of support between these two states and the eurozone in the aversion eachhas to the terms of their bailouts.The empirical work to study this question includes secondary scholarly reading,national and supranational monetary and political policy analysis, and analysis of nationaland supranational economic indicators. The three main topics analyzed in this study arethe EU/IMF bailouts, the austerity measures taken in each state due to the crisis, and whatmay be the resulting national political changes. The effects of the three key issue areasdiscussed in this thesis are studied in both Greece and Ireland.
 
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TABLE OF CONTENTSList of Figures ivList of Tables vAbbreviations viIntroduction 1
Implications 1The Question 3Thesis Organization 6Methodology 7
Chapter 1: Setting the Stage 9
The significance of Greece and Ireland becoming EU and eurozone members 9Why Studying Greece and Ireland Matters 15
Chapter 2: Greece 19
The Crisis and Greece 19Austerity and National Political Change 24
Chapter 3: Ireland 43
 The Crisis and Ireland 43Austerity and National Political Change 51
Chapter 4: Conclusion Fraying at the Edges? 64 References 70 

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