Typically, when a business collapses, the government or other businesses and financial institutions offer money to help them recover. Especially if the business has a lot of people and their interests involved, the government provides some kind of a financial aid, either to be reimbursed or not reimbursed. Such action is called “bail out”. One of the most well-known examples of bail out would be the one during the US financial crisis in 2008. When the banks and several companies collapsed and went bankrupt, the government provided nearly USD700 billion to help them recover. On top of saving these institutions, there were far too many people affected by the crisis that governmental aid was necessary.
Bail out is not only restricted to businesses and corporations. It can also be used when a country is in a severe financial crisis. When a country faces a severe debt crisis and is not able to pay back, it may get some help from other nations or international financial organizations like the International Monetary Fund (IMF). When bail out begins, money is either lent or given for the country or company to use to get out of the crisis. After sometime, when it recovers to a certain degree in which its financial providers feel that it could become more independent, especially in terms of employment and the overall management, it is then left to operate on its own.
The Greek debt crisis has been an ongoing issue for some time. As a member of the Euro Zone, European Union members came together to offer bail out. As Greece faced financial crisis, the whole EU was affected in terms of currency rate. Its currency value depreciated, although the crisis was not the only contribution to such happening.
As there is a vast network of intertwined interests, bail out not only rescues a business or a country alone, but also may reduce the impact received by other institutions or countries. Although not always successful, it can make a business or a country profitable again. From the crisis to its recovery, the bailed out member may contribute to the economy even more actively.