Austerity Measures Are Not the Solution to the EU Debt Crisis

The Economic and Financial Affairs Council at LIMUN 2013 agreed that the Eurozone crisis needs global solutions. Its consequences spread beyond the borders of the EU and affect an interconnected worldwide market. The most likely solution to solve this problem is by global cooperation and trade. Additionally, there is a need for urgent implementation of the fiscal union.

The EU debt crisis is an international concern. As the delegate for China Mattias Verbergt pointed out “it is about all nations fighting against time” to solve a problem that affects everyone. The current financial market is so integrated that all nations feel the economic and financial consequences of the Eurozone. For example, India is a major trading partner of the EU and has been directly affected by the Eurozone crisis.

There are other alternatives

Greece is one of the countries most strongly affected by the crisis. The solution depends on what changes are made to the financial system. The delegate of Greece pointed out that “Alternative solutions have to be explored. Austerity measures will only cause more social unrest”.

Delegate of China

Delegate of China

The delegates from Saudi Arabia and China expressed their concerns on the situation saying that “austerity simply does not work for the EU” and that “these measures are not the only way”. Stimulating measures are necessary to revive the Euro currency.

The United Nations must come up with specific solutions that will not include the disintegration of the single currency. The delegate for Greece explained clearly that the 170% GDP in the country must be addressed, and if not, “Greece will be more like to leave the Eurozone”. Austerity measures have been implemented in Greece without any positive results. However the delegate for Greece acknowledged that “the EU has supported Greece with financial assistance of €34.4bn in the second bailout, and this shows the commitment of the EU for Greece to remain part of the Union”.

More financial investment and integration

The Eurozone is facing a double-dip  recession, where the Southern European countries of Greece, Italy, Portugal and Spain are the worst affected. However, there are some positive examples too. The delegate for Italy said that the country won't ask for a bailout from the European Stability Mechanism (ESM). The delegate of Germany also stated: “Germany does not believe in the EU failing. We do not support austerity measures only, but we need control and supervision of member countries in order to see growth”.

Delegate of Germany

Delegate of Germany

All countries agreed that international cooperation is needed to face the debt default of the EU, and that protectionism and austerity are not the only solutions. What is needed is more economic and financial integration within the EU and international trading and investments with overseas countries.