Causes and consequences of the 2008/09 Great Recession and how Belgium is now perfroming economically - Essay Example

301-302, 2010). However, lately, Belgium has been going through one of the worst periods in its economic history due to the great recession who has torn the economy apart since the 2008 and still there appears no immediate and definite light at the end of this tunnel. This paper is a brief attempt to explore the causes and consequences of this recession on Belgium with focusing on macroeconomic variables of GDP, inflation, unemployment and exchange rate. Discussion It was during the first half of 2006 that the economists of United States became sure that the country was actually suffering from a liquidity crisis and was heading towards a recession.

Amongst many reasons, which trigged this recession were the subprime mortgage crisis, unethical accounting practices, bursting of housing bubble, too easy credit conditions, failure of Lehman brothers and others (World Bank pp. 85-89, 2011). More importantly, this crisis had nothing to do with the European countries but all of these countries imported this recession from US during the year 2008. Considering the high dependence of Belgium trade and other sectors on the US, it was evident that eventually, the country was going to catch this recession disease.

Furthermore, as mentioned several times later in the paper, that the mounting public debt of Belgium acted as stimulus to further worsen the situation. According to the reports from the fall of 2010, Belgium debt has gone on to touch the level where it is has become equal to the total national income (Elliott & Cole, pp. 301-302, 2010). The point, which is important here to understand, is that at least in the next couple of years, there is no possible way in which Belgium could improve its economic condition and show any GDP growth.

Considering the debt of the country, high unemployment, inflation, bailouts and on top of it, the Eurozone crisis, even if a miracle happens, Belgium would only be able to contain the damage and remain at the same level (Goethem, pp. 36-37, 2011). In order to make matters even worse, a caretaker government for more than the past 400 days is currently governing the country. The caretaker government has only the authority to take urgent decisions and cannot interfere in other matters. Therefore, the current government will only do firefighting, which it will be doing with full force in the coming months and cannot engage in any activities, which could be aimed at fire prevention (World Bank pp.

85-89, 2011). This will even make the situation worse because now, the government needs to take some very important decisions, which would include devaluing its currency to increase its export bill since the volume has gone down, aim at balancing the deficit, and buy more time with lower interest payments and other important steps. Even if the new government comes as early as today, it will take its time before it could implement its decisions and before those decisions and stimulus could produce any visible ground results.

Moreover, as mentioned earlier that much of the portion of the GDP of Belgium depends upon the exports of the country. Quite understandably, the volume of the international trade and even the dollar value has decreased significantly over the past few years and considering the slow rate of the recovery, it will take time before the