Threat of the austeri̇ty policies implemented by periphery countries of Euro area after global financial crisis: Fi̇scal trap

The objective of this thesis is to evaluate the austerity policies which were applied in the euro area after the year 2010 and to examine the fiscal trap risk for periphery countries of the euro area. After the 2008 global crisis, in many countries bailout plans and stimulus packages including spending rise/ tax cut have been applied in order to ease the effects of the crisis and to prevent them from getting deeper. But in 2010 applying the bailout and stimulus packages caused public sector balances get worse such as public sector deficit/GDP and public debt/GDP. In order to eliminate this situation stimulus and to get economic growth at GDP, packages are replaced by austerity policies in the euro area. In this context the historical process, factors that cause this crisis and structural problems of the global financial crisis and the euro debt crisis were contented in the thesis. Then, the reasons of austerity policy on the issue by calling expansionary fiscal contraction hypothesis, base of hypothesis and succesful periods were explained. Finally, the result of economic and social consequences austerity policies at periphery countries of the euro area was explained. The highlight of the thesis, resolution strategy within the framework austerity policies after the euro debt crisis are wrong diagnostics and after austerity policies applications for periphery countries of euro area put down fiscal trap with a process that feeds itself. Keywords: 2008 Global Financial Crisis, Euro Debt Crisis, Expansionary Fiscal Contraction Hypothesis, Austerity Policies, Fiscal Trap.