Eurozone Crisis: Fiscal Effects and Bail-outs

Abstract

This paper analyses the effectiveness of bail-out mechanisms after the global crisis in comparison to Covid-19 pandemic crisis in the Eurozone economies. It seems that in the circumstances of global instability, laissesz-faire rules in economy are not enough, meaning that government interference is desirable and unavoidable. Although adopted in the Eurozone before the outbreak of the global crisis, the adopted clause on non-use of the bail-out mechanism has had to be ignored several times in the past. The research is based on descriptive statistical analysis using available data in relation to bail-out programs in the period 2008-2020 in the selected Eurozone economies. The research shows that governments appear to have learned at least three lessons from the global crisis: (a) need for quick implementation of emergency measures, (b) the bail-out mechanism was effective in reducing the budget deficit, however, has a negative impact on public debt, and (c) strengthening the fiscal framework of the Eurozone economies by defining supranational fiscal rules remain the essence of a stronger Eurozone and the European Union.