The bursting of the United States housing bubble during the period of 2006-2007 had triggered the 2008 financial crisis which also spread to the European Union zone. Many major European banks, many of which had significant holdings in the American market, started to crumble, followed by bailout requests, initiating a subsequent crisis that led to the Eurozone crisis. The combination of government debt crisis, a banking crisis, and further worsen by a growth and competitiveness crisis had thrown what could probably the biggest challenge faced by the enlarged Union at the dawn of the twenty-first century. In light of the crisis, the European Council has initiated three relief institutions: the European Financial Stabilisation Mechanism for all EU member states, the European Financial Stability Facility for Eurozone member states, and the European Stability Mechanism. The essay will first address the EFSM and its questionable legal basis, and finally focus on the European Stability Mechanism which was aimed to be a permanent mechanism. This essay will argue that the the formation of the three relief mechanisms played a key role in cushioning the crisis for the EU zone, and show how the EU can work together in the light of a crisis.
Before, the European Union can only apply its financial regulation on member states that accept those regulations. The role of national legislatures in member states is crucial in implementing EU financial directives. As for the enforcement of financial regulations, the EU relies on institutions such as the European Central Bank (ECB) and the Committee of European Banking Supervisors (CEBS) for the banking function or the Committee of European Securities Regulators (CESR). It has been argued that th...
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Shambaugh, Jay C., Ricardo Reis, and Hélène Rey. "The Euro's Three Crises." Brookings Papers on Economic Activity Spring (2012): 157-231.
Whyte, Philippe. The Eurozone and the U.S.: A Tale of Two Currency Zones, FOREIGN POLICY FORUM (Nov. 21, 2011); Bordo, Michael D. The United States as a Monetary Union and the Euro: A Historical Perspective, 24 Cato J. 163, 166-168 (2004).
EUROPEAN COUNCIL 16–17 DECEMBER 2010 CONCLUSIONS, European Council 17 December 2010
"Judgment of the Court (27 November 2012, Pringle, Case C-370/12)". EUR-Lex. 27 November 2012.
"FAQ about European Financial Stability Facility (EFSF) and the new ESM" (PDF). EFSF. 3 August 2012
"FAQ about European Financial Stability Facility (EFSF) and the new ESM" (PDF). EFSF. 3 August 2012
The European Union has a common “government” called the Parliament. In the background essay it stated, “The role of the parliament is to debate and pass laws, make sure all EU institutions work democratically, and debate, and adopt the EU budget”. This means that the parliament has control over the laws, and controls the European Union budget. In Document B it mentions, “Whatever institution governs the trade of a nation or group of nations whether monarchy, dictator or parliament essentially rules that nation”. This means that the parliament has control over the European Union.
European Commission. Economic and monetary union and the euro. Publications. Luxembourg: Publication Office of the European Union, 2012. Document.
The European Union today is a political and economic entity that controls in a single market located mostly in Europe exploiting Euro as a single currency uniting the vast majority of its members. The market that all European Union members share provides free trade of goods and services as well as a common external tariff. One might argue that the European Union would not perceptible its current influence had it not been for the introduction of the Euro. Speaking of the benefits of the Euro, one can name the elimination of exchange rate problems, creation of a single financial market, providing price stability, low interest rates as well as being a political symbol of unity and commitment to the Union. Today, Euro is the second reserve currency in the entire world - a fact that clearly speaks for itself of its value in the global market.
When analysts criticise the lack of democratic legitimacy in the EU they generally point to the mode of political representation and the nature of policy outputs. Only one branch of the EU is directly elected is the European Parliament. Though stronger than it once was, the EP remains is actually only one of four major actors in the EU policy-making process. The EP is a body without power or accountability, and easily dismissed just as a ‘talking shop’ (Colin Pilkington.) Only 75% of its amendments are accepted by the Commission and the Council of Ministers.
The combined countries, now more commonly referred to as Euroland, will fall under one national bank. This bank, the European Central Bank, will determine the economic fate of the entire “Union”. The merging of eleven currencies is a daunting and somewhat lethal task. The ECB is comprised of seventeen members, each having one vote within the governing council. What has most Europeans concerned is the ECB’s secrecy of conducting business. There is no voting record nor will there be published minutes of the meeting that take place. Wim Duisenberg president of the ECB and a native Dutchman stated that he wanted the ECB to be one of the most open banks in the world.1 When BBC reporter Steve Levinson confronted him about this in Frankfurt Germany Wim replied
Peterson, J. and Shackleton, M. 2002. The institutions of the European Union. Oxford: Oxford University Press.
The recent global financial crisis that affected not only America but also Europe and other parts of the world resulted in massive unemployment. This is due to the high costs of operation that many corporations faced forcing them to cut on labor costs. There is need for European government interventions to avert this social crisis and prevent the occurrence of such a crisis in future. Unemployment has hit the service sector harder than other sectors with the following being the most affected: automotive, construction, tourism, finance and real estate. The global financial crisis has also increased consumer prices thus pushing inflation. According to McCathie, “the increase in July consumer prices to 1.7 per cent pushed inflation in the currency bloc up towards the European Central Bank’s target of keeping inflation at below, but close to 2 per cent. Eurozone consumer prices had stood at 1.4 per cent in June” (McCathie, 2010).
The subprime mortgage crisis is an ongoing event that is affecting buyers who purchased homes in the early 2000s. The term subprime mortgage refers to the many home loans taken out during a housing bubble occurring on the US coast, from 2000-2005. The home loans were given at a subprime rate, and have now lead to extensive foreclosures on home loans, and people having to leave their homes because they can not afford the payments. (Chote) The cause and effect of this crisis can be broken down into five major reasons.
“One out of every two hundred homes will be foreclosed every month, making 205,000 new families enter into foreclosure,” Mortgage Bankers Association. The housing industry in the United States is undergoing an unfortunate crisis. There are way too many homes being foreclosed, which cause a ripple of problems.
This paper provides an overview of the crisis, outlines the major causes of the crisis, examine alternative solutions to the problem
Weiss, M.A. (2009) ‘The Global Financial Crisis: The Role of the International Monetary Fund’, CRS Report for Congress.
Walker, Bruce. "Euro Likely to Keep Losing Value." The New American. The New American Magazine, 7 July 2010. Web. 23 May 2011. .
Eurozone crisis has had huge impacts not only on the economy of the UE but also on the other countries who have economic and financial relations with the members of the union. The reason why we have decided to examine the Eurozone crisis in detail is to have a better understanding of the mechanisms behind this extremely important and complex problem and also to make accurate inferences about the solution alternatives. In our pape...
Senior, Nello Susan. "Chapters:4,15." The European Union: Economics, Policies and History. London: McGraw-Hill, 2009. Print.
Ferguson et al. International financial stability. Geneva: International Center for Monetary and Banking Studies, 2007. Print.