Essay Euro Zone Crisis

4185 Words Apr 12th, 2012 17 Pages
Leadership and Decision Making in the Eurozone

1. Decision Making

1.1 The concept of a “perfect” UNION

United Europe was at its birth and remains at its heart an economic idea. Its purpose was peace, but the means were economics. The purpose of the UE was to avoid another World War by binding together the nations, economically and financially so that is no longer in their self interest to go to war.
In 1957 the European Economic Community took birth. In 1979 was the first experiment with a currency union by linking European currencies which led to the European monetary system, the precursor of the euro.
Once the euro was established it seemed like the big steps to get those next levels of cohesion never actually
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There was a real worry that Spain would be following the Greeks, and there were also worries about Portugal. The next phase of the crisis really intensified when it became apparent that Ireland’s housing boom had turned to bust. People thought Greece is the problem as long as we insulate it, we’re fine. And it suddenly said, well actually this can move to Ireland, Portugal, Spain, Italy because suddenly any country with bad debt dynamics we have to think that that’s a possible loss, so we have to be very careful about buying those bonds. By the time Greece, and then Spain and Portugal were also in trouble, there were questions starting to arise about Italy. It is a much bigger country, it has the third largest bond market in the world. The first time that the European debt crisis washed up on Italy’s shores was in November 2010. That was the first time when we really saw the spreads between Italian bonds and their German equivalents soar. There were lots of meetings in 2010, a lot of summits that were supposed to solve the issue, there were a lot of rescue plans announced but unfortunately none of it was acted decisively so that the markets could finally put their fears to rest. There was a key moment in 2010 that if you talked to senior officials around Europe now, that they see being one of the biggest mistakes in the handling of the crisis, and that was the agreement made between the German
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