DEBT TRAP IN THE EURO AREA COUNTRIES WITH A FOCUS ON GREECE AND ITALY

The diploma thesis entitled as Debt trap in the euro area countries with a focus on Greece and Italy, provides a basic overview of the context of debt issues. In general, there is a trend that the more indebted countries are those that have been members of the EU for longer. If solutions will not be found to reduce debts, they will continue to be passed on from generation to generation as great burdens. This diploma thesis provides a comprehensive overview of the issue of public debt, their consequences and possible solutions. The thesis deals in more detail with the evaluation of the situation in Greece and Italy, the historical context and its overlap to the present. In the practical part, the established hypothesis about the negative impact of the public debt on economic growth is tested through an econometric analysis performed by the OLS method. The results of this analysis carried out for two euro area countries, Greece and Italy, confirm the established hypothesis, but with some reservations. Based on a graphical analysis of the business cycle and public debt, the potential for retroactive causality of these two variables can be confirmed. At the same time, the possible impact of the rate of economic growth on the ratio of public debt to GDP and also the possible negative impact of a high level of public debt on economic growth can be accepted.