Abstract:
© The Author(s) 2017. This chapter analyses how much of the problem in exiting from the Greek debt crisis stems from the asymmetry of the arrangements that have been put in place, not just for Greece but for the whole of the euro area arising not only as a result of a monetary policy but also as a result of constraints placed on fiscal adjustment. While several provisions exist to help those Member States in financial distress, the primary responsibility for solving the problem lies with the distressed and disadvantaged and is not spread equally across the EU as a whole. This asymmetry is particularly pernicious, as reducing a deficit by cutting expenditure and worse still raising taxes creates a downward spiral on growth and employment and therefore ability to service an ever increasing debt burden. The asymmetry is also internal as the burden of adjustment falls heavier on those less well-off exacerbating a much quicker path from optimism to pessimism than the other way around. The chapter concludes by suggesting a way forward for joint action to address the debt problems of the euro area that is symmetric, reduces the need for austerity and its adverse consequences, thereby offering a route to reducing anxiety.