Is a Common Currency in Europe Sustainable? Essay

This article analyzes the underlying causes of the current crisis, estimates how bad the crisis is likely to be, and discusses the government economic policies pursued so far (by both the

The weekend of May 5-6 opened a new chapter in the Eurozone debt crisis as voters in France and Greece voiced their disproval over current leadership. With news of France's Sarkozy losing the presidency, and "a dismal election result for Greece's pro-bailout parties" (Reuters.com. May 7, 2012. PP. 1); the future of the Eurozone continues to be shrouded in uncertainty. Debt yields for Greece, Ireland, and Portugal spiked as bond investors ruminated over fiscal and monetary policies. Likewise in Spain, the ten year bond pushed closer to the "psychologically important 6 percent" (Reuters.com. May 7, 2012. PP. 1) threshold. These events highlight the troubling issues of austerity, growth, and debt service which are weighing down the European economy, and as a result imperil the global economic growth story.

I concluded six months ago (Truman 2008) that there was no shared diagnosis of the origins of this crisis. Nothing that I have heard or read since then has convinced me otherwise. If anything, disagreements have become more intense, in the meantime. This fact hampers our ability to learn the proper lessons from this crisis. This fact also means that it is useful for me to declare my own biases in advance. Conventionally, causes of this financial crisis include some or all of the four following elements: macroeconomic policies, financial-sector supervision and regulation, financial engineering, and the global activities of large private financial institutions. The context for each element is the United States or other similarly advanced countries.

From the Financial crisis that struck the United States in 2008, to the world economic crisis and currently the European debt and sovereign crisis, the snowball is growing each day as the whole world's economy is heading towards the rock bottom. This project tackles the issue and the causes of the European debt crisis and its consequences on the euro currency and on the international financial markets. It also focuses on examining the austerity measures and policies taken by European governments to bail their countries out of the turmoil, and finally it tenders solutions that could be undertaken by governments to face or unravel such

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

(Reinhart and Rogoff, 2009) together with (Kindleberger and Aliber, 2005) in hundreds of pages present an exhaustive analysis of the crises within the last hundred of years, along with the classification of these in types of

The Eurozone is facing a serious sovereign debt crisis. Several Eurozone member countries have high, potentially unsustainable levels of public debt. Three—Greece, Ireland, and Portugal—have borrowed money from other European countries and the International Monetary Fund (IMF) in order to avoid default. With the largest public debt and one of the largest budget deficits in the Eurozone, Greece is at the centre of the crisis. The crisis is a continuing interest to Congress due to the strong economic and political ties between the United States and Europe.

After reading the three main articles, it is evident that different authors have different opinions regarding the European sovereign debt crisis but all of which agree that fundamentally it is due to excessive government debt. This supporting material is no different as it also cites that excessive government debt is the main cause of the crisis. The supporting material below contains segments from a chapter of the book titled, The Real Causes of the Euro Crisis by Thomas Fazi, in the book, The Battle for Europe, published in 2014, pages 61 – 96. The author segments his chapter into different subtopics, which I have covered below and brings to light another cause of the Eurozone crisis that has not been discussed in the previous articles, which is the Eurozone as a tax haven.

The economic crisis within the Eurozone has grown rapidly for the past five years, and members of the European Union struggle to enact any effective measures to halt or reverse its effects. Perceived booms in the housing markets were really only bubbles which popped and sent entire national economies spiraling downward into recession. Nations of the Eurozone have accumulated massive public debts, far larger than the 60% of GDP maximum specified in the Stability and Growth Pact. In 2011, Greece’s debt reached an unbelievable 170.3% of its GDP. Economic punishments are the specified consequences for violating this regulation, but the pact has not been adequately or consistently enforced. So many states have fallen past the debt limit that

Analysis: The Eurozone-crisis needs to be dealt very carefully, as there is a lot at stake for all major players (Eurozone members, EU, ECB) involved and every step that will be taken will be difficult to reverse. Therefore, it must be examined where the roots of

According to the specialists, there are many reasons for this global financial crisis. We try to focus some prime reasons behind this

The European Sovereign debt crisis describes the era where various European countries were facing a government deficit which affected the Euro zone. There are numerous solutions that have been implemented to try eliminate this problem. One of the major solutions was the austerity fiscal policy which aimed to decrease the government expenditure in order to decrease the government budget deficit. This essay will outline the austerity policy and use the IS-LM curve to show how that was implemented by the Eurozone and the effect had on the Eurozone. This essay will furthermore outline the effect that the policy had and how it had an effect on the economy and the major effects and countries that triggered this crisis. The essay will then evaluate the effect that the monetary policy. This essay will then offer other recommendations on how to decrease the government budget deficit resulting in the economy returning to the natural rate of output.

In what came to be known as the “Eurozone Crisis”, many peripheral countries, particularly Greece, Ireland, Italy, Portugal, and Spain, put in place policies of fiscal consolidation, aimed at tax hikes and budget cuts, and structural reforms along the lines proposed by the EU leaders and the ECB. The large budget deficits and high sovereign debts

There has been financial crisis across the world since currency came about. It started with the barter system which allowed people to trade goods and services but this sometimes proved to be more difficult than beneficial. Then around 600 B.C., coins and currency came about. Since then currency went from being precious metals to paper money. With the development of currency, came international trade. “Banks and the ruling classes started buying currencies from other nations and created the first currency market. The stability of a particular monarchy or government affected the value of the country 's currency and the ability for that country to trade on an increasingly international market. The competition between countries often led to currency wars, where competing countries would try to affect the value of the competitor 's currency by driving it up and making the enemy 's goods too expensive, by driving it down and reducing the enemy 's buying power (and ability to pay for a war), or by eliminating the currency completely” (Beattie, 2007). Money gets its value by being a medium of exchange, a unit of measurement and a storehouse for wealth. Money allows people to trade goods and services indirectly and understand the price of goods.

The high public debt poses a threat to financial stability and is the largest hurdle for the pro-growth measures of the Italian government to boost the economy more strongly. With debt at 132% of GDP and 270% of the individuals’ tax base, the key for the debt sustainability lies in the ECB ability to keep