The Crisis Of The European Union

1309 Words6 Pages
Inflation, crisis, recession, fear, unemployment rise, debt, and depression are some of the commonly used phrases in relation to failing economies. There are many different factors that contribute to the downfall of an economy, whether it be the political structure, the aftermath of a war, or the role of government itself. A failing economy’s severity can vary based on the specific country’s situation. In comparison to the world, there have been a few countries under the European Union that have continually worsened economically through the years: Greece and Spain. To understand the economic issues arising in Greece and Spain, one must have an understanding on the basis of the European Union. The European Union (EU) came into existence on…show more content…
3). There have been a number of factors contributing to Greece’s fiscal crisis- both endogenous and exogenous. When focusing on the endogenous causes of the fiscal crisis, “there is no doubt that running consistently widening public deficits in conjunction with declining external competitiveness played a decisive role on the deteriorating fiscal stance of the Greek economy” (Kouretas, Vlamis, 2010, 394). Greece’s deficit has risen to 12.7%, which is more than four times higher than the European rules have allowed (BBC News, 2010, para. 8). On the other hand, the main exogenous implication is the timing of response. “The Eurozone governments failed to give a clear signal indicating their readiness to support Greece, while the Greek fiscal crisis was escalating,” because many EU Member States were unsure of how much assistance they could individually given to a country in financial difficulty (Kouretas, Vlamis, 2010, 396). In addition, Greece has been facing problems with the underground economy, which is also known as the “shadow economy.” The shadow economy focuses on criminal activity, such as drugs sales, smuggling, gambling, etc. and focuses on legal transactions that are conducted in cash and unreported to fiscal or other competent authorities (Katsios, 2006, 62). Greece has been accountable for about 27-30% of the GNP for the underground economies in comparison to various European countries (67). With all these financial issues going on in Greece, there is a
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