Eurozone crisis can be seen as the most important economic problem of the European Union in the history. Because of that crisis the currency union have faced the possibility of separation which is an extremely critical issue not only economically but also politically. Until the subprime crisis which became prominent by the bankruptcy of Lehman Brothers in 2008, the economic level of the EU members were similar. When the bankruptcy occurred those countries started to differentiate in a very significant way. 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.
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...
... middle of paper ...
...eighbor countries will be highly affected by the issue.
In a sense, fiscal austerity or an exit scenario is the alternative to accepting differentiated government bond yields within the Eurozone. If Greece does not leave Euro currency by accepting higher bond yields, then high interest will decrease demand, raise savings and slow the economy.
The other option, an exit scenario of Germany, also causes problems for the country’s economy. As a result of loss of purchasing power in the periphery economies and additional transaction costs, German exports to these countries will decrease. Also a stronger Euro will reduce competitiveness of German exports against the rest of the world. On the other hand, Germany has significantly benefited from the latest developments inside the union. It is observed that there is an increase in demand for German bonds.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- European identity, meaning unification or integration of Europe, is associated with the European Union (EU). The EU includes 28 member countries, more than half the European countries have already joined the EU for years and thus the EU unifies Europe. The Eurozone crisis is an ongoing crisis that has been affecting the countries of the Eurozone since early 2009, when a group of 10 central and eastern European banks asked for a bailout. Consequently. The crisis has made it extremely difficult for countries such as Greece to refinance their government debt without the aid of third party such as the European Central Bank (ECB) or the International Monetary Fund.... [tags: central bank, greece, integration]
1355 words (3.9 pages)
- In 2009, the Eurozone along with most of the world was struck with a severe economic crisis. An economic crisis that the European Union (EU) or the European Central Bank (ECB) has never seen. This crisis affected every aspect of the lives of its citizens and caused the European Union and ECB to respond in ways that we have never saw. These responses by the EU and the ECB is still being felt today and has sparked intense debate on the role and purpose of the Eurozone, the EU and the ECB. In this paper, the causes of the Eurozone economic crisis, the responses by the EU and ECB to the crisis and the outcome so far on these responses is going to be addressed in this paper.... [tags: European Union, Euro, Treaty of Lisbon]
1803 words (5.2 pages)
- The Eurozone Crisis - Causes and Solutions The so called “Eurozone Crisis” began in 2009 when it became a publicly known that Greece national debt was over 113 % of their GDP. Consequently, Ireland, Portugal, Spain and Italy joined the club with their debt ratio exceeding 100 %. The investors concerned with the level of the sovereign debt, led to increased yield on the bonds of affected countries, which effectively caused the unsustainably deficits in those countries. Although European Union took certain preventive measures by setting up a rescue package, further political disagreements, lack proper planning and compliance with newly established rules, made the problem to grow and continue t... [tags: global financial crises, voters, economy]
2233 words (6.4 pages)
- Introduction The sovereign debt crisis in the euro area has revealed that the monetary and fiscal policy framework of the European Monetary Union (EMU) is still incomplete, (Gianviti et al, 2010). They further state that Eurozone’s institutional policy arrangements, regarded by many economists as ineffective are being subjected to tests in the extreme and have fuelled the financial crisis. According to (Higgins & Klitgaard, n.d), the countries that were most exposed to the devastating effects of the euro area sovereign debt crisis had engaged in substantial foreign borrowing in the run up to the crisis.... [tags: the sovereign debt, euro area, fiscal policy]
1141 words (3.3 pages)
- Months of negotiations on extending Greece's cash-for-reforms deal with the eurozone have collapsed, so the Greek bailout ran out on 30 June and Alexis Tsipras's government failed to make a key debt repayment to the IMF. The European Central Bank (ECB) has said it won't extend emergency funding for the banks and there is a growing risk of Greece leaving the single currency. How in the world did it come to this. Late in 2013 Greece’s public debt was estimated at 171.8 percent of gross domestic product (GDP) (ANSA, 2014), accentuating the Greek debt crisis that has been growing since before the economic crisis of 2008.... [tags: Greek Debt Crisis]
2643 words (7.6 pages)
- Considering many point of views that economists have as an explanation why the financial crisis between 2007 and 2009 was precipitated, we can consider that the main facts that contributed for that were the global imbalances in trade and in cross-border capital flows. The United States dollar was and still being considered as the key reserve currency, which must serve both national and global objectives. In addition, the trend towards “finance-driven capitalism” in many OECD countries by the United States, and growing income inequality can be also considered the reasons for the financial crisis to have had been anticipated.... [tags: European Union, Euro, Eurozone]
1241 words (3.5 pages)
- All eyeballs in the financial world have been in one place over the last 6 months. This is not in reference to Wall Street or the U.S banks. All heads have turned to one distinct country in Europe, Greece. A country so small it would take twice the land area just to fill the state of Texas, yet so burdening on the financial system it could bring down the entire European Union. So why have economists, the financial world, and all of the EU turned towards such a small country. The arrows all point to Greece being in economic turmoil with two major options on the table.... [tags: European Union, Europe, Eurozone, Euro]
1510 words (4.3 pages)
- On November 1, 1993 the fate of our economy was decided. After one half of a century of waiting, the Eurozone came to a solemn existence. The once great powers of the world, the European nations, had completed a risky, and perhaps foolish, task. The world’s first regional economic system was successfully created. Now, almost two decades later, the world’s economies are on the verge of collapse, and it seems that no economy, other than the Eurozone, is at fault, due to its recent and quite careless economic endeavors.... [tags: Economics]
1743 words (5 pages)
- Following the events of the catastrophic 2008 European Financial Crisis, members of the Eurozone began to fear for what they once thought was impossible; the collapse of the Eurozone. After hopes of a speedy recover proved futile, European leaders expected recovery processes to take longer than anticipated. The P.I.G.S. members of the Eurozone, Portugal, Ireland, Greece, and Spain, were hit hardest by the financial crisis, with Greece undoubtedly being in the worst economic condition. Being brought to the brink of collapse, Greece can attribute to its poor economic condition from its reckless deficit spending, poor fiscal policy, and weak state institutions.... [tags: European Financial Crisis]
2362 words (6.7 pages)
- Since 2008 there has been an ongoing financial debt crisis that has affected the majority of the world states. However, the most disastrous economic decreases have been witnessed in the European continent. Therefore, this crisis is widely known as the European Sovereign Debt - Crisis. The aim of this document, however, is to analyze and discern possible policies focusing on providing a set of solutions that may help the Greek government in regards to their financial debt within the larger European crisis.... [tags: European Sovereign Debt Crisis]
1268 words (3.6 pages)
- Concussions in Sports
- Learning Styles: The Theory of Multiple Intelligences
- Questions and Answers About Partnerships and Uncorporations
- The Distinction Between an Unfair Prejudice Petition and a Statutory Derivative Action
- The Meaning of International Multimodal Transport
- An Act of Workplace Violence