Page 328 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

International Trade and Finance

Notes Self-Assessment
1. Choose the correct options:
(i) Which countries, besides Greece, have economies that are especially burdened by debt?
(a) Germany, Britain, and France
(b) Portugal, Spain, and Italy
(c) Bulgaria, the Czech Republic, and Slovakia
(d) Norway, Denmark, and the Netherlands
(ii) If Greece were to default on its debt,
(a) the Greek government would be unable to borrow money.
(b) other countries' economies could suffer as well.
(c) lenders that Greece owes money would not be paid back.
(d) All of the above.
(iii) The BEST meaning of "austerity measures" is
(a) periods of economic difficulty.
(b) legislation to prevent bankruptcy.
(c) Policies to cut government costs steeply.
(d) strict conditions on loans.
(iv) What is the eurozone?
(a) a common currency union of 16 European countries
(b) the area affected by the "contagion" of the Greek debt crisis
(c) an atmospheric layer above the continent of Europe
(d) another name for the European Union.
(v) What spurred the riots in Athens in October 2011?
(a) banks willingness to take a "haircut" on their Greek debt
(b) a government plan to drop the euro for the drachma
(c) austerity measures passed by the Greek parliament
(d) tax cuts imposed on wealthy Greek politicians.
28.4 Summary

• By all accounts, the external debts of Eastern bloc nations and LDCs are enormous. Government
officials, financiers, economists, and the news media are urging that these countries be given
help to cope. In opening hearings on “International Financial Markets and Related Problems”
before the Committee on Banking, Finance, and Urban Affairs of the House of Representatives
on 21 December 1982, Chairman St. Germain referred to this call for help as the “conventional
wisdom.” He said, “These hearings . . . come against a backdrop of news reports about impending
requests for an enormous new funding of the International Monetary Fund. The conventional
wisdom suggests that the Congress should quickly and quietly vote the new funds, accept the
Administration’s and the Federal Reserve’s rationale, and ask questions later—if at all.” But,
should the United States help these countries ? If so, how ? These are the current policy questions.
My purpose is to clarify the issues involved and to provide guidance to the public and to policy
makers who must resolve them.
• To some observers, the United States is caught in dangerous waters where, like the straits between
Scylla and Charybdis, avoiding one disaster leads to another. If defaults and political change
were the only dangers, we could steer a course between the two. But, in setting our policy
course, it would be a mistake to assume that these are the only or even the greatest dangers we face.
The greater peril may lie in the side effects of policies adopted to help debtor nations cope.

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