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
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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.
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.
Most citizens of the euro area did not understand what they were losing when the Maastricht Treaty was signed in 1992, and the euro introduced in 1999. You couldn’t see it until there was a serious recession—when the government really needed to use expansionary
In dealing with current EU hot button topics, solutions are as many and varied as there are countries in the European Union itself. There are many aspects to a countries point of view on such issues including location, history, economy, political outlook, and so on. Because of these influences countries sharing similar histories, locations, economic standings, and etc. band together to create voting blocs in order to get their agendas pushed forward. This paper will discuss the viewpoints of Albania, Bulgaria, and Romania with respect to the refugee crisis and the Eurozone crisis as related by several meetings of representatives from each country. After reading this briefing, Bulgaria citizens should be aware of our country’s feelings
With the impending Presidential election consuming the American news cycle, major media outlets and the general public alike have neglected a growing crisis within one of the world's most important centers of commerce and culture. Despite the domestic rancor over stimulus packages, runaway debt and rampant unemployment which has inspired fierce political debate here in America, the fact remains that many European countries have borne the brunt of the global recession currently decimating national economies. The so called Euro Zone, a consortium of 17 neighboring nations which belong to the European Union (EU) and have adopted the Euro as their common currency, has experienced unimaginable financial disarray during the last decade. In the modern age of globalized economic structures, the increasing instability emanating from European markets is now threatening to spread to Asia, America and around the world.
The Eurozone crisis is defined as a multi-year debt struggle that began as early as 2009 and originated in several of the Eurozone states. These countries were not able to pay back the debt they continuously built up even with help from institutions such as the European Financial Stability Facility, the European Central Bank, and the International Monetary Fund. The debt the European Union members acquired were not considered a crisis until after the Great Recession in 2009. This is because some countries released false reports, which soon became discovered, regarding their economic stance. States were able to deceive other nations by inconsistent accounting, off-balance sheet transactions, and the use of complex currency and credit derivatives structures. Greece is considered the main culprit for causing the majority of the debt within the European Union. The Economic and Financial Committee are responsible for receiving and organizing these reports. Fabricated reports were easy for nations to submit due to the established rules set and the organization of the Maastricht Treaty created on February 7, 1992 right before the European Union was established.
The Eurozone economic crisis began at the end of 2009. Essentially, the failure of the Euro caused huge problems in southern European countries (such as Spain, Portugal, Greece, and Italy). After the introduction of the Euro, these countries suddenly had the credit to borrow money like they hadn’t had before. They extravagantly increased spending with this borrowed money, which at first boosted the economy but eventually led to massive debts. Since every economy was intertwined, the rest of the Eurozone was effected as well. Because everyone had been borrowing and lending money to each other, a problem in one country could reverberate across the continent, creating a chain reaction of defaults. Germany agreed to bailout these smaller countries, effectively picking up the tab, as long as they agreed to very strict austerity measures. The contrasting expectations between a financially responsible country like Germany and one that doesn’t pay taxes such as Greece amplified tensions. Cultural differences such as this are surprisingly relevant to the economic crisis, as the disparities in immigration policy demonstrate.
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.
Difficult economic situations often create international conflict and human rights abuses. Recently, the European economy experienced an enormous debt crisis. The crisis created unstable economic and social situations in many countries. The Eurozone crisis negatively affects Greece, Spain, and the United States. First, the European Union crisis elicited a health crisis in Greece. Second, the European Union crisis caused unemployment and stress in Spain. Third, the EU crisis generates negative implications for the United States’ economy. Evidently, the fall of Europe’s economy caused severe impacts on surrounding countries.
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.
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 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 the EU’s accomplishments in economic growth and job creation (European Commission, 2010a:3). Statistics published subsequently exposed the magnitude of the crisis: real GDP contracted by 4%, unemployment soared at an unprecedented level, public finances deteriorated, and social cohesion in the EU has fragmented (Eurostat, 2010). The crisis has also exposed the fundamental weakness of the Union, especially in the face of new challenges from emerging market competition, an ageing population, and depletion of resources. Therefore, the Europe 2020 strategy adopted by the European Commission in 2010 introduces a new growth model for the EU to respond to the various challenges mentioned above, particularly the global financial crisis. (European Commission, 2010a:5).
The terrible internal economies control. The countries in euro area, especially Portugal, Ireland, Italy, Greece, and Spain lost their control over the domestic financial situation. Specifically, Greece had long standing financial problems. The government spent largely on the social welfare, and had a great number of public servants who had extremely generous wage and pension benefits. Besides, the government had little control over its budget deficit, leading a long standing financial budget overrun. In Ireland, the estate bubble greatly destroyed government tax income and consumption power of public. Portugal’s lasting recruitment policies led to a great number of redundant public servants. The Italian economy suffered from the high unemployment rate and high tax rate, and had a slow growth in recent years.
The Euro Crisis is the failure of the Euro, the currency that binds all 19 countries of the Eurozone together. The tightly knit nature of this economy means that if even one country’s economy fails, Europe as a whole goes with them. This currency, which was originally created to stimulate economic growth, has become the cause of much accumulated debt.