Greece or Spain's Economic Crisis Affect European Countries and the World

We will now examine the causes and the sequence of events from the Great Depression 1929-1939 and the Global Financial Crisis in 2007-2009. Although they both initialled in the United Stated, the effect also severely affected the Europe. The worst affected countries such as Austria, Portland, German and French, suffering Real GDP Loss of -22.45%, -20.70%, -16.11% and -14.65% respectively during 1929-1933 (Maddison, 2006).

The bursting of the United States housing bubble during the period of 2006-2007 had triggered the 2008 financial crisis which also spread to the European Union zone. Many major European banks, many of which had significant holdings in the American market, started to crumble, followed by bailout requests, initiating a subsequent crisis that led to the Eurozone crisis. The combination of government debt crisis, a banking crisis, and further worsen by a growth and competitiveness crisis had thrown what could probably the biggest challenge faced by the enlarged Union at the dawn of the twenty-first century. In light of the crisis, the European Council has initiated three relief institutions: the European Financial Stabilisation Mechanism

The second phase of GFC stepped after the US bank crisis has evolved into the euro crisis, which thought to be the will of US leading troubles. Europe had its own internal unbalances that proved just as significant as those in US. Southern Europe racked up huge current-account deficits in the first decade while countries in the north ran offsetting surpluses. The imbalances were financed by credit flows from the euro-zone core to the overheated real estate markets of countries like PIIGS (Portugal, Ireland, Italy, Greece and Spain). The euro crisis is also a continuation of financial crisis by other means, as market ignoring the weaknesses of government debts overwhelmed its GDP.

The Global Financial Crisis revealed many flaws in the institutional framework of the Eurozone, as well as the flaws in the policies implemented in the aftermath of the revelation of the crisis. One of the major flaws revealed in the institutional arrangement of the Eurozone project, is the clause in the Maastricht Treaty which limits the ceiling on the ratio of the annual government deficit to gross domestic product. As a result of the Global Financial Crisis, The Maastricht Treaty put into place structural impediments that prevented member states from implementing counter-cyclical policies. It is likely that the crisis left a deep and long-lasting effect on economic performance and overall social hardship. Job losses were contained for some

By the end of 2008, the European Union began experiencing rippling effects of the United States financial crisis. Several member countries, most notably on the southern end of the continent, faced high levels of debt and unemployment. Portugal, Iceland, Ireland, Greece, and Spain, derogatively referred to as “PIIGS,” required extensive economic support from the EU in order to repay government debts and bail-out private banks. Disbursal of aid in 2010 proved successful in promoting economic recovery in some countries; however, the vast majority observed only slight economic improvement which led to doubts regarding the effectiveness of the harsh austerity measures implemented. Ireland has most clearly benefited from the financial support of the European Union as the country’s unemployment rate has dropped below ten percent and is expected to witness 4.5% GDP growth in 2016. Portugal, on the other hand, shows little fiscal improvement as evident in an unemployment rate of 13% and an expected GDP growth of only 1.6% in 2016. Although both countries faced tough financial crises in 2010, Ireland has notably outperformed Portugal in resolving the situation. The weak economy in Portugal, as well as continued fiscal hardship in the remaining “PIGS” countries, threaten the preservation of the European Union as financial inequality between the members persists.

In 2008, there is an international crisis started in USA. It affects almost the whole world. The American enterprise institute, Peter Wallison had found in a research that said in United States government, they still believe in the idea of the 2008 financial crisis was caused by insufficient regulation of the private sector (Opinion Journal: What Caused the Financial Crisis?, 2015). There are some countries in Europe have not been in crisis because they were not have held by the United

Dr. Clark: I am writing this brief policy memo in regard to the recent monetary crisis involving certain European countries, namely Greece and Spain. The focal organization handling the issue is the EU (European Union). The EU was established on November 1, 1993 by the treaty of Masstricht. It developed a single, regionalized, market structure through a system of standardized laws that apply in each member state so that citizens, goods, capital, and services are regional rather than local. With the establishment of a common currency, the Euro, the EU is also concerned with the overall economic and fiscal health of each member country. EU banks oversee localized financial institutions, and have the legal authority to enact localized changes in order to keep currency balanced. There are also branches of the EU that focus on legal and foreign policy issues, which sometimes blend into the economic realities of globalism (Europa, 2009). The EU acts as much more than an economic modifier, though, and member nations are encouraged to participate in cultural sharing (music, the arts, etc.), religious tolerance, and of course sport. This changes the overall rubric of the EU in that it actively seeks out foreign trade and markets as a large regional economic sector, so successfully that it counts for approximately 30 percent of world trade output (The EU Single, 2009).

Consisting of nations such as Germany, Greece, and Spain, the European Union is a partnership meant to induce certain benefits for the European nations, such as a “peaceful coexistence, the reduction of border restrictions…combined strength and influence” and most crucial the construction of a single currency, the Euro (Schmidt). The official currency of Eurozone, the euro was expected to ease the process of capital exchange between 17 of the now 27 members of the European Union. However, in the context of our present day, instances such as Greece’s struggles with bailouts and Britain’s exit from the European Union has left people questioning if Euro will breakup soon. Interestingly, the current monetary conditions seem to mirror those of U.S. under the Gold Standard in the 1930s, such as the tightening of monetary. These similarities between between Euro and the Gold Standard have peeked investor’s interest by raising the questions, “is the Euro is a stand-in for the Gold Standard?” and if this is the case, “will it also fail?” In an effort to allow one to construct their own conclusion, this paper will introduce a comparison between the Euro and the Gold Standard through the categories of their purpose, organization, and crisis.

This section contains a summary of the article, The Euro Area Crisis Management Framework: Consequences for Convergence and Institutional Follow-Ups by Ansgar Belke, in the Journal of Economic Integration, published in December 2011, pages 1 – 33. The main thesis, methodology of the report, results/findings and the final conclusion and recommendations of the articles will be addressed below.

After the 2008 crisis caused by the collapse of the American investment bank, the Lehman Brothers, the Europe Union faced difficult decisions to both recover the economy in the short term and in improving the economy for the long. ‘With their immediate response to the Banks in Europe giving them €4.5 trillion, the European Union then had to respond to the debt crisis that occurred as they realised a debt fuel economy was not stable. They then came together to form an Economic union where by a fiscal treaty was created, the idea behind the treaty was to limit yearly deficits to 0.5% of a country’s GDP’[1], this is the idea of a Budgetary policy, aiming there deficit, equilibrium or surplus to reduce debt. The policy was to follow the principles, ‘it should be timely; this is to allow for quick support of economic activity during low demand, temporary; to avoid a permanent deterioration in budget positions, the spending when borrowing low should be mix with both revenue and expenditure ideas; there can be impacts on demand in the short term affecting consumption allowing for growth, it should be directed within the stability and growth pact; it provides a common framework and allows for better measures to be take of the cyclical conditions while strengthening long term fiscal discipline, and should be accompanied with structural reforms that support demand.’{2]

2008 there was a financial crisis, it had a profound impact on the European Union and the euro areas. in 2010

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.

States and the ensuing global fallout, the Eurozone had an economic crisis of its own that is

The crisis has hit European economies unprecedentedly hard and its effects have occurred in two phases. The first phase is the economic recession following the global economic downturn. The second phase is the so-called sovereign debt crisis which started in Greece firstly and then appeared in Ireland and Portugal. Like many other countries and organizations, European Union (EU) has also developed strategies in order to tackle the challenges of the crisis (Yurtsever, 2011).

The crisis in Europe began when the financial markets lost confidence in the creditworthiness of Greece and other European countries and interest