Due to this lack of independent structure, it is of vital import that the euro becomes more susceptible to shocks – whether they be large or small – to ensure that the economy remains stable throughout tough economic times. Being a member of the monetary union ensures a “higher degree of resilience” for each participating country. (Praet, 2105) By countries in the EU opting out of this monetary policy it weakens the economy as a whole. It makes countries who participate in this policy more vulnerable to a severe economic downturn due to the fact that they cannot adjust to shocks as quickly. This is due to the “spill over” of unemployment and lack of investments of countries not enforcing said polices.
"Europe must prevent Greece from becoming an out-and-out catastrophe and make sure that the same fiscal 'remedy' is not applied to other weak economies" -- Franziska Brantner The burden of debt in the European Union, especially in Greece and Ireland, is detrimental to the continent's economy and people. Not only is it an issue throughout Europe itself, but it has become a dominant issue in global economics as well. As these European governments struggle to get back on their feet, the fate of the euro is clinging for life. It has become clear of the extremely high deficits, some at over 100% GDP, which are attached to several EU countries. This European crisis is a continuation of the global financial crisis, but also an issue which was brought upon themselves, largely by Greece.
Finally the Turkish economic burden on the EU's budget represents the greatest obstacle for its membership in the union. Once a member Turkey would qualify for assistance from the EU funding bodies and could bankrupt the EU funds for such areas as economic improvement and structural growth. The admission of Turkey would release a flood of economic refugees into the other member states. This is not something that Europe would look forward too.
Total government debt and also problems of banking sector lead many countries to negative GDP growth, high unemployment rates and more importantly social unrest. As a result of those huge economic and social issues resulting from Eurozone crisis, finding a solution to the currency problem become an urgent as well as a crucial task of the member countries. In order to fix this problem, there were many different proposals submitted by all parties concerned. Policy implementations taken by the European Central Bank have had some powerful impacts on the economy of the union, and therefore the idea concerning a separation within the union has almost disappeared. However, to be able to find an effective and permanent solution it is needed to focus on long term fiscal and monetary policies.
The innovation and securitisations including the excessive amount of speculation and leverage were also a contributory factor. With such inter-relatedness in the global economy, it is becoming increasingly important for consumers, corporations, and governments to be able to exercise efficient and effective financial prudence to prevent such a catastrophic economic event again in the future.
The most prevalent risk being that these agents that are creating a financially globalized world can cause huge financial crises’. When the government liberalizes the countries financial system to enter other markets, it now goes through market discipline by foreign and domestic investors. Having foreign and domestic investors monitoring the countries economy can generate a crisis when fundamentals deteriorate (). Secondly, the possibility of imperfections in international financial markets can also lead to a crisis. It could generate speculative attacks, crashes, herding behavior, and generate bubbles.
It seemed rather imprudent of the Union to bank on the prospect of huge developments within Developing Countries in spite of the economic bubble they were forced to maintain; it was bound to afflict the people involved. However, now that the problem at hand has grown from a simple debt deficit to a prospect of another global recession, the Greeks would only be taking a small hit compared to the dips that now seem unavoidable for both the Euro and the Global Economy. Therefore as disastrous as the implications of this situation can be, it is more important for the world to know if it can be solved and whether the European Union and Global Economy can dodge this particular bullet. Strictly speaking, the Eurozone Crisis revolves around three main parties – Greece (which can be held responsible for most of it), the European Union (which is being held answerable for starting this domino effect and therefore curbing it) and the rest of the world – the Global Economy (that may be on the brink of a second major recession in just 5 years). Unfortun... ... middle of paper ... ...’t want to pay for the deeds of its policy-makers.
The History According to Arnold (2009, p.803-809), subprime mortgage defaults in the United States was the first problem in this current financial crisis, then bubbled damaging cris... ... middle of paper ... ...tion. Firstly, the Fair Value Accounting is not always accurate in the financial market because the value of assets and liabilities always fluctuated. Sometimes, the asset value is overestimate and underestimates. Secondly, the Fair Value Accounting makes financial institution reduce their ability to face the risk because in this current economic situation the value assets are fluctuated. It is a problem to managers to sell or buy the assets.
These countries were not at the same level and position as the richer countries were in, and are not as stable. Q2. What is meant by the presidentialization of euro area governance is where the Eurogroup makes important decisions in the European Monetary Union than other groups. The Eurogroup makes important and heavy decisions that deal with the economic crisis, such as reforms, that help fix the crisis. Many important decisions have been made under this new management, such as summits, where meetings are held in order to make important decisions for the crisis under the European Monetary Union.
For example, several countries Europe transformed the financial crisis into sovereign debt crisis. The crisis is borne as a result of policymakers thinking that stability can be achieved through policies besides the standard toolkit used by developing nations. Such common approaches include higher inflation, debt restructuring, significant financial repression and capital controls. The world super powers think that doing so is like foregoing their credibility thus worsening the condition instead of seeking the required immediate solutions. As a result the state of living deteriorates and the citizens... ... middle of paper ... ...financial crisis is disheartening.