The Impacts of the Euro-Zone Crisis Essay

The Impacts of the Euro-Zone Crisis Essay

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The Euro-zone is an economic and monetary union (EMU), comprised 17 European Union (EU) member states, which have all adopted the Euro as their common currency and sole legal tender. Within the zone, monetary policies are the responsibility of the European Central Bank (ECB), governed by a president with a board, comprised national central banks leaders. Fiscal policy is less centralized, but restricted by the previously agreed upon rules within the Broad Economic Policy Guidelines. These guidelines set individual national limits on deficits and national debt - Fiscal Commitments (European Council 2011).
In the early 2000s the euro grew in appeal for many reasons: euro-zone was similar to the U.S. economy in relations to trade openness and GDP, the region was able to keep inflation under control and never experienced external debt or current account deficit like the United States. This favored the euro against the dollar. (Nesvisky, 2005). Many experts thought the euro was inevitably the rival to the dollar and would eventually take over the the reserve currency. The thought was not if, but when this would happen.
By 2005 many central banks were beginning to diversify away from the dollar and began to hold more Euros; by the end of 2006 the total number of Euros in circulation exceeded dollars by 75 billion, further evidence of its gaining strength (EconEdge, 2007). In addition, a study by several economists revealed that the reserve currency is basically the one that more countries peg their own currency to and could easily transition to the euro on the condition that most countries would soon begin to manage their currencies with respect to the euro instead of the dollar. These results were based on examining the currencie...


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...ureau of Economic Research. Retrieved from http://www.nber.org/digest/feb07/w12333 html
Stewart, Heather. (2012). Euro Crisis spreads and puts the world economy at risk. The Observer.
Washington, R.A. (2013, April). What Success looks like. The Economist. Retrieved from http://www.economist.com/blogs/freeexchange/2013/04/euro-crisis-3
Could the Euro Replace the Dollar as the World's Reserve Currency. (2007). The Economic Edge.
Retrieved from http://econedge.org/23/could-the-euro-replace-the-dollar-as-the-worlds-reserve-currency/
European Council. (2011). European Council Conclusions. Retrieved from http://www.european- council.europa.eu/council-meetings/conclusions/
The John Buckle Center. (2012). Discussion of the Crisis in Europe. Retrieved from http://www.johnbucklecentre.org.uk/opensite/wdnews/news.php?xnewsaction=fullnews&newsarch=06201 2&newsid=31




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