Eurozone

In: Social Issues

Submitted By alysss10
Words 571
Pages 3
Europe is in crisis because it has been living beyond what it can hold up. No single European country is to blame. The entire Eurozone threw economic caution out the window. When Europe was doing just fine, countries in the Eurozone could borrow money cheaply, at low rates of interest. Because of this “cheap” debt the countries were lured by the prospect of economic growth, which lead them to borrow more and more. Eventually the Eurozone had more debt than they could imagine, and just when Europe’s spending spree was veering out of control, rising interest rates came along to end Europe’s spending. There are some factors that may have been the reason as to why Europe is like this such as, cheap debt, rising interest rates, bailouts, investor confidence wavers, key stakeholders tighten their wallets, and austerity stifles growth (Introduction: euro crisis explained). When mentioning cheap debt it means when they were borrowing money at an affordable level and it came time to repay, it wasn’t that affordable anymore. With bailouts, they have been paying large amounts of money to high-risk Eurozone countries. For investor confidence wavers, it means that when investors see that things are not looking to good, they want to take their money elsewhere, so they leave hoping to find more money somewhere else.

In the financial sector of the European crisis, there were many different reasons as to why this happened the way it did, but the reasons are few. Some of the reason is the banks were overleveraged, and the main was the financial problems that reverberated through out the world from the United States crisis. The banks were overleveraged because it carried all the debts from all the countries. Banks all over Europe hold Greek and other euro debt, and Greece or any other country defaulting could ripple out and cause bank failures and economic earthquakes (new…...

Similar Documents

Eurozone Crisis

...Eurozone crisis: A Brief Assessment In his recent statement before leaving the seventh summit of the G-20, Prime Minister Manmohan Singh expressed his worries over the gloomy Eurozone outlook and the way it could further dampen global markets and adversely impact India’s economic growth. The Eurozone jitters have quite recently shown their impact on the country’s currency and caused it to downgrade and touch the lowest level of Rs.56.23 against the $ as on May 30, 2012. The situation in Europe is of particular concern as it accounts for a significant share of the global economy and is also India’s major trade and investment partner. Clearly, the situation in Europe needs major policy attention not just for Europe but for all major global economies, be it the emerging nations or the major developed economies. Eurozone Sovereign Debt Crisis: Background The Eurozone crisis is a term used to describe the soaring debt levels of five of the major Eurozone nations and their inability to pay off a part or whole of this debt that they have accumulated over the recent decades. These five nations including Greece, Portugal, Ireland , Italy and Spain have failed to generate enough growth for their economies to retain the bondholder’s confidence in their ability to hold the guarantee that they promised to deliver. The crisis that blew up has far reaching consequences extending beyond the national boundaries of these five nations painting a gloomy picture for all the major global......

Words: 1527 - Pages: 7

Eurozone

...members of the European Union who wanted to participate (cited in Lynn, 2012, p. 25). Those nations that joined this Eurozone can be seen in Figure 1 as indicated by their blue color. Figure 1 Members who abandoned their national currency in favor of the new "Euro" currency became known as members of the "Eurozone" (Ashton, 2012). By linking a single currency to multiple economic engines, the Euro quickly gained value and popularity. After roughly one decade of existence, the Euro surpassed the par value of the United States dollar in 2003 (Westover, 2011). As financial reserves increasingly switched from dollars to euros, the outlook for the European Union seemed almost guaranteed. Although not perfect, many hailed the creation of this economic machine as brilliant. Never before in the history of the world had so many nations conformed to a universal currency. A gamble had been taken and had seemingly paid off. As the financial crisis began in 2007-2008, flaws that had gone unnoticed began to appear in the organizational structure of the Eurozone. With so much economic turmoil on a world-wide scale, certain nations that are members of the Eurozone began to experience difficulty paying large debts that had been accumulated. For example, Greece, a member of the Eurozone, seemed on the verge of bankruptcy. The instability of this member of the Eurozone threw the value of the actual currency into question. If a nation pulled out of the euro, how much was the new......

Words: 1426 - Pages: 6

Eurozone Crisis

...MAster’s in Global Management 2012/13 | EUROZONE CRISIS | Prof. Ricardo Lima | | Anar husseynov, Girish Medh, Shakeb Assri. | 1/2/2013 | Hochschule Bremen University of Applied Sciences | Contents 1.Introduction 3 2. History 3 2.1. The Werner Report — EMU in three stages 3 2.2. Snake in the tunnel 4 3. Purpose of single currency 5 4. Gross Domestic Product 5 5. Inflation 7 6. SWOT ANALYSIS 8 6.1. Strength 9 6.2. Weakness 9 6.3. Opportunities 9 6.4. Threats 10 7. Eurozone Crisis. 10 8. Greece’s Debt Crisis: Background 12 8.1. Build-Up to the Current Crisis 12 8.2. Financial Assistance from the Eurozone Member States and IMF 14 8.3 Why didn’t Greece leave the Euro? 15 9.Recommendations 17 10. References 18 1.Introduction The euro (symbol: €; banking code: EUR) is the currency of 17 EU member states. It was launched on 01.01.1999 virtually, but physically launched from 01.01.2002. The currency is the second most traded currency after the US dollar. The currency is used by around 332 million people daily. €915 million in circulation, highest combined value of Bank notes in circulation in world. The countries that use the euro are Finland, Austria, Belgium, Cyprus, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. If you are planning a trip to Europe then the euro is the currency you will need for most of the locations you visit. There are additional......

Words: 4984 - Pages: 20

Eurozone

...countries. But it failed miserably in this role. Initially when the global outlook was rosy, Eurozone countries reaped benefit from it in the form of highly stable currency, low prices and lower interest rates, which ultimately resulted in economic prosperity and rapid growth and development of these economies. But the Eurozone faltered when it faced the global slowdown and mayhem in financial markets all over the world. The more vulnerable nations like Greece, Portugal and Italy which had high debt to GDP ratio, were the first to get affected. Greece borrowing costs increased sharply and there was high level of unemployment. This soon spread to other nations. To prevent these members from defaulting and to keep the euro zone, Germany and France had to intervene. They along with the troika of EU, IMF and ECB made multiple liquidity injections into the weak economies of Greece, Spain, Portugal and Italy. Still these nations had to struggle to survive the burden of Eurozone. Eurozone was envisioned to assist its member countries in times of crisis and help them come out of it. But, when the crisis struck, Greece and other countries started looking a way out of the zone. This was the big failure of Eurozone. In spite of the huge financial assistance from Germany and other nations, these countries are still stuttering and there is no solution visible in the near future. The purpose which Eurozone was to serve could not be fulfilled. An entity is tested in the worst of its......

Words: 317 - Pages: 2

Eurozone

...The European Union, officially implemented in 1999, created history as the first political and economic integration of its kind. However, in recent news, this union has been undergoing a series of severe economic crisis among member countries. The following paper will look to analyze this issue by examining its main causes, the reasons behind their severe suffering when compared to United States, European nationalism, and the future of international businesses in the case of a Eurozone collapse. Main causes of Eurocrisis The causes of the Eurozone crisis are both numerous and complex creating somewhat of the perfect storm within the member countries’ respective local economies at the start of the downturn. For the purpose of analysis, the main causes of the Eurocrisis can be divided into three main categories: sovereign debt, banking and inflation, as well as politics and labor. The following case will explore these categories in further detail. To begin with, the ratification of the Maastricht treaty, forming the European Union, brought with it two conditions that potential member countries had to meet in order to be able to adopt the Euro currency. Specifically, given the interdependent nature of the agreement, a member state was required to demonstrate economic health. This was measured annually through their maintenance of fiscal deficits under 3% of GDP, and government debt below 60% of GDP (Roscini & Schlefer, 2012, p.1). However, during the years preceding......

Words: 2584 - Pages: 11

Eurozone and the Euro

...Eurozone: Euro Falling? In recent news, many of the Eurozone Financial Ministers met to discuss the value of the Euro, how they will reform the outstanding debt situation within the Eurozone, and how they will respond to strengthen its power. However, discussions have come to a standstill as German Chancellor, Angela Merkel, is only looking out for the best interests of her country. She wants those financially irresponsible countries, such as Greece, to reform their ways and is, moreover, concentrating her energy instead on changing Eurozone treaties to allow closer fiscal union and supervision of member nations' budgets, even though analysts have told the Euro-bearing nations that the currency might take a harsh blow from which it will never recover, possibly leading to the complete dissolution of the Euro currency. People are saying that this will only have an effect on Europe, but they are wrong. The official decisions that are made will affect the rest of the world and will either cause Europe to rise up to the occasion or make the world enter another Era of Depression. It is because of these reasons that show Europe’s debt crisis has forestalled market activity; they are implementing characteristics of a mercantilist society, modernizing their economic systems to benefit only themselves, and a globalized economy will occur, whether its one of prosperity or trepidation. Mercantilism which is the economic theory that European governments used serving only their......

Words: 1528 - Pages: 7

The Eurozone Crisis

...| The Eurozone Crisis | | | ECON 3860Word Count: 1,495 | | The Eurozone Crisis The Eurozone is a combined group of countries using the euro as their only currency. It was created in 1999 and currently consists of 17 countries – not all part of the European Union (Investor Words). Within the Eurozone, the countries follow a monetary policy and controlled by the European Central Bank (in other words, the ECB controlled the supply of the euro within the 17 countries). In an attempt to control government debt levels and deficit spending the Maastricht Treaty was created. As years passed, some countries government deficit began to rise and increased debt levels. By 2010, Greece (3% of the Eurozone) had public debt around 100% of their GDP. In order to lower their debt levels, the Greek government had increased their taxes and their borrowing levels. Solutions for fixing this issue consisted of stronger countries paying off the Greek debt – however not everyone agreed to such methods. Eventually, the value of the euro went down in the exchange markets and other Eurozone countries such as: Portugal, Italy, Ireland and Spain faced the same problem as Greece. The International Monetary Fund (IMF) and the European Financial Stability Facility (EFSF) donated money to help reduce the amount of debt – however not enough (Krugman, Obstfeld, Melitz, 2011). Since the Eurozone is controlled by monetary rules and does not consist of fiscal union (government collection of......

Words: 1718 - Pages: 7

The Eurozone Crisis

...| The Eurozone Crisis | | | ECON 3860Word Count: 1,495 | | The Eurozone Crisis The Eurozone is a combined group of countries using the euro as their only currency. It was created in 1999 and currently consists of 17 countries – not all part of the European Union (Investor Words). Within the Eurozone, the countries follow a monetary policy and controlled by the European Central Bank (in other words, the ECB controlled the supply of the euro within the 17 countries). In an attempt to control government debt levels and deficit spending the Maastricht Treaty was created. As years passed, some countries government deficit began to rise and increased debt levels. By 2010, Greece (3% of the Eurozone) had public debt around 100% of their GDP. In order to lower their debt levels, the Greek government had increased their taxes and their borrowing levels. Solutions for fixing this issue consisted of stronger countries paying off the Greek debt – however not everyone agreed to such methods. Eventually, the value of the euro went down in the exchange markets and other Eurozone countries such as: Portugal, Italy, Ireland and Spain faced the same problem as Greece. The International Monetary Fund (IMF) and the European Financial Stability Facility (EFSF) donated money to help reduce the amount of debt – however not enough (Krugman, Obstfeld, Melitz, 2011). Since the Eurozone is controlled by monetary rules and does not consist of fiscal union (government collection of......

Words: 1717 - Pages: 7

The Future of the Eurozone

...policy makers within the EMU. The Euro zone’s Economic Monitory Union should strive to reform the Euro zone in terms of discipline and loyalty. By so doing, it will enhance cohesion as they move towards the same goal of offering stability and encouraging steady growth within the region. A proper institutional framework should be set up so that monitoring of member discipline is enforced. All in all, the ability of the European Union's policy makers will determine the future of the Eurozone where their successes lead to the Regions Success and their failure the regions failure. References Bosch, X. V., & Verhelst, S. (2014). What Future for the Eurozone? Combining Discipline, Solidarity and Institutional Reforms. EUROPEAN POLICY BRIEF, 1-11. Dăianu, D., D'Adda, C., Basevi, G., & Kumar, R. (2014). The Eurozone Crisis and the Future of Europe: The Political Economy of Further Integration and Governance. London: Palgrave Macmillan. Nordvig, J. (2013). The Fall of the Euro: Reinventing the Eurozone and the Future of Global Investing. New York: McGraw Hill Professional. The paper has not been proofread thus has mistakes that can be avoided. The writer should be precise “started picking up and appear to have a bright future” The writer should discuss the main topic The writer must always remember to label the introduction. The writer has a good conclusion...

Words: 729 - Pages: 3

Eurozone C

...THE IDEA OF ETHICS AND THE EUROZONE CRISIS Prepared for: Ms. Homayara L. Ahmed Assistant Professor Prepared by: Bijon Islam (Roll: 21) Faruk Ahmed (Roll: 20) EMBA 14th Batch IBA, Dhaka January 04, 2012 January 04, 2012 Ms. Homayara L. Ahmed Assistant Professor Institute of Business Administration University of Dhaka Sub: Term Paper Submission- The Idea of Ethics and the Eurozone Crisis Dear Madam: Thank you for giving us the opportunity for working on such an exciting topic. Looking at the Eurozone crisis from an ethical perspective reveals several insightful and interesting insights including a look into the idea of equality among the member states, financial camouflage practices and the focus on immediate gains both in private sector and at national level. We have tried to map out such factors that have contributed to ethics mismanagement among the euro member states which have finally culminated into the crisis. We hope that you enjoy reading this paper as much as we did writing this and look forward to your views. Please feel free to contact us anytime if you feel the need for any additional support that we may provide. Kind Regards Bijon Islam – Roll 21 (EMBA 14) Faruk Ahmed – Roll 20 (EMBA 14) pg. 1 CONTENTS EXECUTIVE SUMMARY ...................................................................................................................................................3 1. A. B. C. D. E. 2. A. B. 3. A. B. C. D. E. F. 4. 5. 6. THE......

Words: 4299 - Pages: 18

Eurozone

...Papering over the structural imbalances in the Eurozone with endless bailouts will not resolve the fundamental asymmetries. Beneath the endless announcements of Greece's "rescue" lie fundamental asymmetries that doom the euro, the joint currency that has been the centerpiece of European unity since its introduction in 1999. The key imbalance is between export powerhouse Germany, which generates huge trade surpluses, and its trading partners, which run large trade and budget deficits, particularly Portugal, Italy, Ireland, Greece and Spain. Those outside of Europe may be surprised to learn that Germany's exports are roughly equal to those of China ($1.2 trillion), even though Germany's population of 82 million is a mere 6% of China's 1.3 billion. Germany and China are the world's top exporters, while the U.S. trails as a distant third. Germany's emphasis on exports places it in the so-called mercantilist camp, countries that depend heavily on exports for their growth and profits. Other (nonoil-exporting) nations that routinely generate large trade surpluses include China, Japan, Germany, Taiwan and the Netherlands. While Germany's exports rose an astonishing 65% from 2000 to 2008, its domestic demand flatlined near zero. Without strong export growth, Germany's economy would have been at a standstill. The Netherlands is also a big exporter (trade surplus of $33 billion) even though its population is relatively tiny, at only 16 million. The "consumer" countries, on the......

Words: 964 - Pages: 4

Eurozone

...E SSAY COLLECT ION Crisis in the Eurozone Transatlantic Perspectives ESSAY COLLECTION Crisis in the Eurozone Transatlantic Perspectives This publication is a part of CFR’s International Institutions and Global Governance (IIGG) program and has been made possible by the generous support of the Robina Foundation. The Council on Foreign Relations (CFR) is an independent, nonpartisan membership organization, think tank, and publisher dedicated to being a resource for its members, government officials, business executives, journalists, educators and students, civic and religious leaders, and other interested citizens in order to help them better understand the world and the foreign policy choices facing the United States and other countries. Founded in 1921, CFR carries out its mission by maintaining a diverse membership, with special programs to promote interest and develop expertise in the next generation of foreign policy leaders; convening meetings at its headquarters in New York and in Washington, DC, and other cities where senior government officials, members of Congress, global leaders, and prominent thinkers come together with CFR members to discuss and debate major international issues; supporting a Studies Program that fosters independent research, enabling CFR scholars to produce articles, reports, and books and hold roundtables that analyze foreign policy issues and make concrete policy recommendations; publishing Foreign Affairs, the preeminent......

Words: 13337 - Pages: 54

Crisis in the Eurozone

...the press of a European Union (EU) on the verge of bankruptcy and dissolution. Meanwhile, financial markets backed off from their attacks on the PIGS (Portugal, Ireland, Greece, and Spain) while those porcine countries moved forward with significant reforms, slashing their deficit and debt levels. German growth in the last quarter has driven eurozone growth to above U.S. levels, giving pause to euroskeptics and glee to euroboosters on both sides of the Atlantic. And yet the EU is far from out of the woods. The past two years of global economic upheaval have sorely tested the EU’s Economic and Monetary Union (EMU) and its crowning achievement, the euro. At base, the problem is simple: the EU is an outlier in political and economic history, and markets do not know what to expect from its unique combination of a single currency and separate nation- states. The eurozone crisis reveals the challenges of the EU’s sui generis political status—no longer a mere collection of nation-states, yet not a fully fledged federal entity. What, then, should we expect for the future of European integration? What does the stillunfolding eurozone crisis mean for the larger geopolitical position of the EU? Absent a crystal ball, any response is necessarily hazy and conjectural. Nevertheless, it is possible to sketch out some significant milestones and signposts that will determine the path of Europe’s future. The critical question is whether the leaders and citizens of Europe are......

Words: 990 - Pages: 4

Eurozone Crisis

... The Eurozone Debt Crisis Most of the people know how it feels to owe money, even if it is only to a mortgage company, or to a four-year college loan provider. But it is a different matter for an entire nation to be deeply buried in debt and unable to repay it. When a country drowns in debt, the government of that country usually seeks austerity as the major remedy of overcoming its debt crisis. Austerity promotes slow growth, and this actually makes the situation even worse due to the fact that world economy has become more open and integrated. In today’s world, there is no nation that exists in economic isolation. Every countries almost all the economic aspects- its education, health service, industries, service sectors, levels of income, and employment is integrated to the economies of its adjacent countries. This linkage plays a very important role in the global movement of goods and services, labor, investment funds, and technology. That is, when a country defaults on paying its debt, it not only affects the country in default, but also initiates a global economic crisis. In my research paper, I will tell the tale of eurozone debt crisis, which has created a global hysteria in the current world economy. In the research that follows, I will start with a brief history of the eurozone, how did eurozone face the debt crisis, and what might be ahead for the global economy, amid the ongoing European financial crisis. Eurozone is a term designated...

Words: 2564 - Pages: 11

Eurozone

...The Potential Twilight of the European Union Charles A. Kupchan INTRODUCTION The European Union’s (EU) trillion-dollar loan package succeeded in quelling the financial maelstrom spawned by Greek debt. Nonetheless, the financial crisis has taken a painful toll on many EU members, and high national debts and the uncertain health of the continent’s banks may mean more trouble ahead. Although these economic woes have of late captured the headlines, they pale in comparison with a more serious malady: Europe’s historic experiment in political union is faltering. As the poisonous politics that delayed the EU’s rescue of the eurozone revealed, Europe is experiencing a renationalization of political life. The project of European integration, which has steadily advanced since the bitter years after World War II, has been thrown into reverse as its members claw back from the union the traditional powers of national sovereignty. And the causes run much deeper than the ongoing financial crisis, suggesting they are here to stay. Generational change, a backlash against globalization, and the absence of a compelling vision of Europe’s place in the world may well mean that the European Union is running out of steam. The EU’s uncertain future has enormous stakes for Americans as well as Europeans. Europe remains the United States’ go-to partner on every front—from stewardship of the global economy to curbing global warming to bringing stability to Afghanistan. With U.S. debt......

Words: 1758 - Pages: 8

secondary education - 1197 Words | Berlin Station | Beyblade Burst (51)