"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" -- MEP, Franziska Brantner. The Greek economy has seen a large collapse following the recent worldwide recession. The European Union has expressed concerns for the impact that Greece’s economic collapse will negatively affect other member nations. Greece and the European Union are working to reduce the Greek deficit and to contain the economic crisis to Greece. In order to be a member of the European Union, an applying nation must first meet the requirements of membership as described in the Copenhagen Criteria. There are geographic, democratic and economic criteria. Geographically, the applying nation must be classified as a European nation, as exemplified by Morocco’s rejection. The applying nation must also have a secure and functional democratic government that only acts in accordance with the law. This means that any citizen should be able participate in the political system and that there are free elections with a secret ballot. The government must also respect human rights and have protection policies for minorities, meaning that a persons’ inalienable rights are protected by law and minority groups can retain their culture and language without discrimination. Economically, a country must have a functional market economy on which it can feasibly support itself and other member nations if need be. The country’s economy needs to be able to compete on a global scale and deal with economic pressures. There are also separate guidelines for countries wanting to convert to the Euro. Finally, countries that want to join must agree to uphold laws and regulations t... ... middle of paper ... ...ntertainment, Sports, Technology, U.S. & World - USATODAY.com. Gannet Co., 3 May 2010. Web. 30 May 2011. . Walker, Bruce. "Euro Likely to Keep Losing Value." The New American. The New American Magazine, 7 July 2010. Web. 23 May 2011. . Wallop, Harry. "Greece: Why Did Its Economy Fall so Hard? - Telegraph." Telegraph.co.uk - Telegraph Online, Daily Telegraph and Sunday Telegraph - Telegraph. Telegraph Media Group Limited, 28 Apr. 2010. Web. 30 May 2011. . "What Requirements Must Countries Meet to Become Members of the EU?" EU Requirements. Folketingets EU-Oplysning. Web. 20 May 2011. .
The European Union has been helped economically ever since World War II. Right after World War II’s end, Europe was struggling to hold on. The countries of the modern-day European Union thought it would be a good idea to come together and help each others struggling economy. To this day, this decision has had a very positive outcome on the EU’s economy. As shown in Diagram 1, the European Union combined together has the world’s highest GDP at 18.3 Trillion USD as compared to the United States’ 17.4 Trillion USD GDP and China’s 10.4 Trillion USD GDP. The idea
"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
This financial crisis has caused great problems to Greece, primarily but not limited to an increase in poverty, unemployment and inequality. Greece’s decline started in 2001 when they joined the Euro. From the beginning, Greece never satisfied the criteria of the Maastricht Treaty. The treaty, which forms the basis of European Union selection standards, utilized a set of criteria that a country would have to gratify in order to participate in the Euro. “Countries were required to have annual budget deficits not exceeding 3 percent of gross domestic product (GDP), public debt under 60 percent of GDP, inflation rates within 1.5 percent of the three lowest inflation rates in the EU, and exchange-rate stability” . In particular, Greece’s public debt ratio was at the value of 126.4% of GDP. Many records and interviews show that Goldman Sachs and its president Gary D. Cohne assisted Greece by “fixing” the books and formulating some transactions that eventually resulted in Greece suspiciously filling all the requirements and joining the Eurozone . This “immoral” decision to join the Euro, while having an economy that couldn’t support this position, created another greater need for loans. Greece needed the funds to keep the economy running while the “strong” neighboring countries needed Greece to have a healthy economy. Without a second thought, many members and institutions of the
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 through 2009-2013. Needless to say, the Eurozone crisis with its complexity had a very inflicting effect on European and Global economy. Since the Eurozone is the world’s biggest economy, the impact of the crisis was felt in Asia and even has some effect on the recovering economy of the US (Eurostat, 2014). Furthermore, it exposed the weakness in the Eurozone monetary system – lack of sufficient monetary integration and need of fiscal responsibility of member countries. In addition, implicit guarantees of the sovereign debts of Eurozone members to the investors pushed the interest low, which in return gave an opportunity for the countries with weak economies to borrow more – that included governments, business and individual households to borrow more than they were able to repay. Moreover, long-term spending on social programs, such as public pensions, health care further exceeded what the countries’ economy could possibly pay for and required austerity measures contributed to the public discontent and anger.
Schmitter, P. C. 2001. What is there to legitimize in the European Union… and how might this be accomplished? IHS Political Science Series: 2001, No. 75. Institute for Advanced Studies, Vienna.
... face many problems, the European labor market was affected by this crisis as well, and there were many other problems that were faced during this hard period. The EU’s plans for the future are to minimize the job losses and prevent unemployment, improve job creation, and to recover the economy in a full and stable way. In order for them to make this happen and in order for them to improve and develop the flexibility of the labor market and in order to raise the labor supply, they made some cuts in the income taxes, improved the access to non-standard forms of work, redirected the active labor market policies, and similar activities like these were made. But even though the EU crisis has influenced the European labor market and has created many problems and struggles with unemployment, in the past couple of years they managed to increase the unemployment rate by 2%.
...act the huge levels of debt in the periphery countries combined with the investment in the housing sector which was hardly hit by the subprime crisis in the US. Therefore, the financial integration and the trends feeding the imbalances in Europe such as government spending and investment in non-tradable sectors rather than increasing the competitiveness of their exports brought and amplified market uncertainty about the sustainability of periphery countries debt. Solutions to this would be a much stronger financial, fiscal and macroeconomic surveillance mechanisms along with common financial rules for the banking sector. However, the most important step as to avoid such divergences among euro zone countries would be to keep a certain level of imbalances but with a Fiscal Union so as to mutualize problems, and apply a market for Eurobonds as a way of burden sharing.
Michelis, L. (2011). The Greek Debt Crisis: Suggested Solutions and Reforms. The Rimini Centre Economic Analysis (RECEA), Italy.
The Maastricht Treaty states that any European country can apply for membership, provided that it observes the EU democratic values and principles and it strives to promote them. More precisely, a country can join the EU only if it meets all the accession criteria: political – democracy, rule of law, human rights - , economic – market economy, free competition - and judicial – respect of EU legislation. The accession process consists of three steps: prospect of accession, official application for membership, official negotiations (internal reform process). Once the negotiations and reforms have successfully and satisfactorily been carried through from both sides, the country can join the EU, prior to common agreement from all existing member states. Presently, the EU has offered a prospect of accession to eight countries: Albania, Turkey, Iceland and all the ex-Yugoslavia countries (except for Slovenia and Croatia, already members); however, only five of them have already acquired the official candidate status: Turkey, Serbia, Macedonia, Iceland and Montenegro.
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.[11]
“From time to time it is worth reminding ourselves why twenty-seven European nation states have come together voluntarily to form the partnership that is the European Union.” 1
The Greek crisis is a result of an accumulation of dire policy mistakes. It all began when the previous Greek governments decided not to reveal their debts and deficits in order to fulfill the necessary requirements for the membership of the Eurozone. Furthermore, the government consisted of mass tax evasion as well as corruption. In 2009, the newly elected Greek government decided to expose the real debt and deficits’ figures, which brought much speculative waves regarding the economy. At the moment (since 2010) a number of organizations and countries are providing the Greek state with assistance in regards to alleviating their government debt. International organizations, such as the International Monetary Fund and the European Governing body, the European Union, are undergoing a set of policies designed to assist Greece in its debt crisis. One of the main supporters of the Greek economy is German...
As mentioned before, the EU is the first of its kind; therefore it is natural for there to be some issues. The first major issue of the EU is its legitimacy. The European Union “still lacks widespread support and legitimacy among the citizens of Europe”. (page 315) This could be caused by the “democratic deficit “that has formed in the EU. The European Union is often blamed for having its institutions and operations too remote and “inaccessible to ordinary citizens”(315). The voter turnouts at for the last European parliament elections on saw “43 percent of eligible voters casting a ballot”(315), the lowest ever. This movement has been labelled “Euro-scepticism”, which is described as an opposition to the process of Europe’s integration. According to the BBC, Eurosceptics in the EU’s parliament have more than “doubled their representation [as] about one-third of the 751 MEPs are Eurosceptic” (http://www.bbc.com/news/world-europe-28107633). One major reason for this “Eurosceptic” movement is the economic issues that presented themselves during the 2009 and the 2011 recession. Europe, like the United States, was hit especially hard by this crisis and many flaws in the EU’s economical system were brought forth. The major issue resided with the common currency of the Euro. Countries with weak economies could not print more money to “devalue their currency to pay their debts and make their exports more competitive”. As the German economy was still “functioning reasonably well, the value of the Euro did not drop sufficiently to give a boost to the weaker economies in southern Europe”(314). This caused countries like Greece and Spain to be bailed out by the European Central Bank, but in return were forced to impose strict austerity measures which led to “soaring unemployment rates reaching over 25%” (314) . Riots
Because it could be quite complicated to look at the EU model from a point of classical democratic nation-state, it seems to be reasonable to discuss this problem, not by abstract reasoning, but by focusing on a concrete case. European Union is the best case available, which in recent decades has developed into a new type of political system with enormous consequences on democracy and governance in its member states. Despite repeated attempts for major institutional reforms, this system is likely to persist in its basic structures for the future and is unlikely to develop into a federal state or to disintegrate into a classic international organization. The present state of democracy and governance in the EU is therefore worth to be analyzed, as it is not a mere transitory state.
In conclusion, I would assume that the economy crisis in Greek will not end quickly. The worst of Greek economy may probably be over, but the recovery will still need some years. The governments are still attempting to solve the economic crisis and the population are still attempting to seek for work. Greece debt issue and unemployment should start to fall in 2014, and may even have economic growth by the end of 2014. And if the tax dodger would not avoid paying their taxes, the economy condition may recover a lot faster.