Analysis of the European Economic Crisis and Its Impact to the New Zealand Based Marino Wool Export Industry.

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Analysis of the European economic crisis and its impact to the New Zealand based Marino wool Export Industry.

Executive Summary
This analytical report analyzes the background of European financial crisis and causes impact to the ongoing economic crisis. According to the analysis this terrible situation arises due to amalgamation of numerous complex factors. Reasons caused for this continuing financial crisis varied by country to country in the euro zone. In numerous countries, private debts arising from a property bubble caused to government to transfer sovereign debt to the banking system to avoid the bailouts of banking system.
In a summery, crushing level of government debt in some countries, problems in the
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It resulted to slow the economic growth in those countries.
Trade imbalances
Another significant factor that caused to generate the economic crises in Europe zone was vast deficit in current account balances of the EU countries. In the period of 1999 to 2007 Germany had a significantly healthier public debt and fiscal deficit relative to GDP than the most affected euro zone members. Countries like Ireland, Spain, Portugal and Italy had worse balance of payment positions by having higher imports expenditures over export income compared against with other euro zone countries. Changes in relative labor costs can also be affected to the trade deficit, which made southern nations less competitive and increased trade imbalances. (European Commision, 2012)
Figure 1 - Analysis of gross public debt of European Union member countries.

Figure 2 - Current Account Balances of Euro Zone countries

Structural problem of Euro zone system
According to the euro system they had a monitory union without a fiscal union. Even though they were not fiscal union member countries required to follow similar fiscal policies. But they do not have common treasury to observe it. Therefore countries had a freedom in making fiscal policies in taxation and expenditure. Even though there are some agreements on monetary policy and through European Central Bank members may not simply choose not to

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