Debt-Oriented Growth Efforts & the Inevitable End: The Eurozone Sovereign Debt Crisis

Abstract

This study tries to reveal the unsustainable long-term effects of public expenditures, which are extended based on loan between 2000 and 2015 in 18 Euro zone countries, on economic growth. The countries located in Euro zone chose a way to obtain economic growth by directly lowering taxes on foreign capital investments in the subject period. However, while they could achieve this purpose especially between 2006 and 2007, by 2008 which is subsequent to aforementioned years, they increase their countries’ debt loads and thusly public expenditures extremely. Therefore, these countries which applied austerity policies by 2010 to lower the expenses faced sharp declines of their economic growth rates when they achieved their aims. For this reason, even if Euro zone countries continue to apply various policies today, they have difficulty in redressing their macroeconomic balance because of the effects of debt crisis. Since the solution does not lie behind having a debt-growth which is aimed at increasing public expenditures; it lies behind a foreign trade-oriented growth aimed at developing the production.