The Economic Crisis in Eurozone

Breitfelder, M. (1998). The Euro Currency Age: Challenges and Opportunities for U.S. Businesses. Business America, 119 (7), 33.

The current economic-financial crisis was indeed caused by the simultaneous occurrence of events in different parts of the world that all had a negative effect. These events are subtly different and therefore it is common that only one event is held responsible for the crisis. In reality, the world economy became critical due to the mix of four major events: 1) the unrestrained greed of financiers in the U.S. and U.K., which transformed bad mortgages into toxic financial assets 2) the habit of getting deeply indebted in the U.S. and U.K., 3) the excessive liquidity in Europe, 4) the real estate bubble in the U.S. and some European countries (Thomas, 2011) At the beginning of the financial collapse in the United States, many commentators, among which was the President of the Federal Reserve, hastily affirmed that the situation would only affect the United States and at most, the UK, where the banks,

In Europe, the single currency created additional problems because of overvalued exchange rates, and high bond yields.” (Pettinger, 2013).

As the EU includes 27 states therefore they would inevitably face difficulties due to the diverse range of national interests. On the other hand increasing numbers of policies are decided on a supranational level and therefore speed the process, for example decisions relating to trade or agriculture. However vital policies such as Defence remain intergovernmental, as do decisions such as the accession of new states. The effect of recent economic crisis has made an impact on the creation of EU superstate. The global downturn, which originated in 2007 created the ‘Eurozone’ crisis. As a result EU bailouts have been organized for Greece, Ireland and Portugal. The fear of the crisis extending further across Europe has caused a loss of confidence in the EU, and in particular the euro. There has even been speculation that Greece may have to exit the ‘Eurozone’. Alternatively it has also caused some to call for further integration, arguing the crisis has shown the need for tighter budget rules throughout the EU.

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

On November 1, 1993 the fate of our economy was decided. After one half of a century of waiting, the Eurozone came to a solemn existence. The once great powers of the world, the European nations, had completed a risky, and perhaps foolish, task. The world’s first regional economic system was successfully created. Now, almost two decades later, the world’s economies are on the verge of collapse, and it seems that no economy, other than the Eurozone, is at fault, due to its recent and quite careless economic endeavors. As the rest of the world continues to force the blame upon the Eurozone and its twenty-five member states-including the United Kingdom of Great Britain and Northern Ireland, France, Spain, Portugal, Italy, and Germany, we

On January 1st 1981 Greece joined the European Communities ushering in a period of sustained growth. The countries widespread investments on infrastructure coupled with funds from the European Union led to a sharp increase in revenue from tourism and the service sector. This helped the country reach historical highs in their standard of living. By 2001 Greece had adopted the Euro and in the proceeding 7 years the GDP per capita went from $12,400 in 2001 to $31,700 in 2008, an increase of 156%. The Greek government was encouraged by the European Central Bank and other private banking institutions to undertake loans to fund foreign infrastructure projects like those related to the Olympic Games of 2004. When the financial crisis

The recent financial crisis that was felt around the globe and most significantly in the USA and Europe has had various detrimental and long lasting effects. Superficially the effects felt by the USA and Europe appear to be the same, but there are important differences in its effect, and the way in which both dealt, and are still

One cannot understand the Greek Financial Crises and the general European Financial Crises without understanding the history of the European Union, the creation of the euro, and the Eurozone. The countries involved in the European Financial Crises were Spain, Portugal, Iceland, Ireland and Greece. The Maastricht Treaty created the European Union in 1993. The treaty gave citizenship to all people living in the 28 member countries. This treaty led to the creation of the Euro. In order to join the Eurozone, each member country must maintain sound fiscal policies. Essentially, each country must limit national debt to 60% of gross domestic product and limit annual budget deficits to a maximum of 3% of GDP. The main reason for the greater European Financial Crises and Greece 's crises was the country 's violated the treaty restrictions. Spain, Portugal, Iceland, Ireland and Greece were unable to maintain spending within these limits. Additionally, the European Union has a monetary union but does not have a fiscal union. Each member country maintains its own independent tax and spending policies. The absence of a common fiscal tax for every member country in the EU is the reason for the current crises.

Over the 15 years the German has been widely viewed as the economic catalyst and stabilizer for its fellow European Union states. Even following the Financial Crisis in 2008, the German economy was able to bounce back quicker than neighboring Eurozone states the source of German success points to a high export led growth economy with a competitive manufacturing sector, lower unemployment, balanced budget, and low costs to borrow. With most economic indicators pointing to strong future growth, it remains to be seen whether a spillover effect occurs to the rest of the EU. Despite a number of reforms, EU countries continue to suffer due to lack of global competitiveness. In dire straits, Greece continues to leverage the support of the European Central Bank and Eurozone states to avoid another financial collapse. In support of Greece, Germany itself lent the country €56 billion, however Germany has begun to lose patience over Greece’s attempts to renegotiate terms of its bailout. As the German economy has persevered through economic turmoil, while Eurozone has struggled, Germany continues to be a shining light of prosperity in the European Union.

In 2008, the world was going through one of its worst times in history, the financial crisis and world economic recession. People were losing their jobs, their homes and their future with some having no hope of a recovery. The United States of America was in turmoil as their financial sector was almost dead and the manufacturing industry was close to collapse, the USA has basically not seen a thing like this since the great depression in the 1930s. Four years earlier, at the 2004 Democratic National Convention, a young, unknown U.S Senate candidate was the keynote speaker for the National convention, some were calling him the future of the Democratic party. His name: Barack Obama, at the time no one had an incline as to what he would one day eventually become. Before his great speech no one assumed that he would be capable of aspiring above what his circumstances have put him in. In his speech, he showed his belief in one America and portrayed the fact that anyone can rise and live the American dream, he made this clear when he talked about his background and how he grew up making reference to his father 's journey ' 'My father was a foreign student, born and raised in a small village in Kenya. He grew up herding goats, went to school in a tin- roof shack. His father, my grandfather, was a cook, a domestic servant to the British. But my grandfather had larger dreams for his son. Through hard work and perseverance my father got a scholarship to study in a magical place,

Europe's debt crisis is a continuation of the global financial crisis and also the result of how Europe attempted to solve the global financial crisis that brought an end to a decade of prosperity and unrestricted debt. European attempts at defending itself against a deep recession, has now created a new crisis of unsustainable and un-serviceable sovereign debt. In early 2010 fears of a sovereign debt crisis, the 2010 Euro Crisis developed concerning some European states including European Union members Portugal, Ireland, Italy, Greece,  Spain,(affectionately known as the PIIGS) and Belgium. This led to a crisis of confidence as well as the widening of bond yield spreads and risk insurance on credit default swaps between

Second, capitalists also the cause trade imbalances to emerge. “Commentator and Financial Times journalist Martin Wolf has asserted that the root of the crisis was growing trade imbalances. He notes in the run-up to the crisis, from 1999 to 2007, Germany had a considerably better public debt and fiscal deficit relative to GDP than the most affected Eurozone members. In the same period, these countries (Portugal, Ireland, Italy and Spain) had far worse balance of payments positions. Whereas German trade surpluses increased as a percentage of GDP after 1999, the deficits of Italy, France and Spain all worsened.” - This is what Marxists also had predicted before the crisis that

The global financial crisis of 2008-09 that spread contagiously across the globe has particularly hit the European economies hard, accentuating turmoil in the world financial markets and precipitating the European sovereign debt crisis almost instantaneously. This has consequently wiped away all of EU’s accomplishments in economic growth and job creation (European Commissiona 2010:3). Statistics published subsequently exposed the magnitude of the crisis: real GDP contracted by 4%, unemployment soared at an unprecedented level, deterioration of public finances, and the fragmentation of social cohesion in the EU (Eurostat 2010). The