The Effects Of A Greek Default On The Uk Economy - Dissertation Example

With the passage of time, the issue of the sovereign debt crisis has been getting worse. There are several European Union countries who have taken loans in order to survive in these circumstances and strive to make their overall economic condition better. According to the researchers and analysts out of all these countries, Greece has the worst situation and there is high possibility that the country will default and will not be able to repay the loans. The implications of this possible Greek default will not only be on the respective country but also on the other countries in the European Union.

It is important to acknowledge here that the increasing globalisation and changing global practices have resulted in generating more integrated and related economies. For this reason, no country can avoid the influence of the economic issued being faced by any other country or economy. Through international trade and other cross country connections the distances among the economies of the world. There has been increasing convergence in the economies and as a result all activities are directly related and inter connected.

This connection and relation among the world economies have resulted in the events of Great Depression and the recent economic downturn. 1.2. Background to the Research Study: Researchers, analysts, and economists have been conducting several research studies in order to evaluate and explore the impact of one economy on other related economies. The events like Great Depression have forced the researchers and economists to think about the reasons behind the global impact of default of one economy.

Economists and theorists have provided different theories in this regard, and the most important reason behind this is the integration of the economies. It is not possible for any country to survive in isolation in this global world. After the recent economic recession, the analysts are considerate about the potential recession European Union countries are heading towards. Several countries in the region of European Union are facing the issues related to the relatively lower growth rate and ongoing debt problems.

According to the analysts, the main reason behind this is the austerity plan and policies implemented by the Greece. The Greece is all set to default, as according to Moses (2011), there are around 98 percent chances that Greece will default owing to the worsening debt conditions in the European Union region. Different European countries, including Germany, United Kingdom, France, etc, are taking considerable preventive measures in order to avoid and reduce the impact of the Greek default on their economies.

All of this results in calling for formulating effective and efficient strategies on the national level to avoid another worse recession. For this purpose, it is important to first identify and explore the reasons behind the potential Greek default and its implications on the other related countries. Secondly, it is important to acknowledge that the Greek default will directly influence the trade and bond market of other European countries also. Along with this it will also affect the exchange rate and value of Euro. 1.3.

Rationale of the Research Study: The research study has been undertaken by the researcher in order to identify the causes behind the worsening economic and debt condition of Greek and to explore its impact on other European Union countries specifically United Kingdom. United Kingdom has direct trade relations with Greece, and if Greece is unable to repay the loans this will results in exposing the banks in UK to the issues of the financial system in Greece. As, the banks and financial institutions in UK will have to write off assets because of the repayment failure on part of the Greece, and this in turn will influence the short term profits.

Apart from this there are also several other negative implications associated with the default of Greece. It is important to understand the relationship between the fiscal policy and the country