Evaluate the Euro zone as common currency zone in the light of the light of the recent economic crisis.
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Eurozone is a significant element in the economic integration of European Union. It is formed by Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The Euro is also used by six other European countries – Monaco, San Marino, Vatican, Andorra, Kosovo and Montenegro. Denmark and Lithuania are going to adopt the Euro soon. This leads to the fact that about 360 million Europeans use this currency from day to day.
Euro area symbolizes a strong unit in the inte
ational community which is indicative of the world economy health as well. Nowadays the EU accounts for a fifth part of the GDP and the third part of world trade. For all that what circumstances resulted in enormous financial losses and even recession?
Though the process of financial integration in Eurozone started at 1957, it was the changeover to the Euro that led to the fully integrated financial market. The aim of this step was to strengthen the financial system, to spur business activity and to stabilize economic growth. To some extent these goals have been achieved.
The adoption of the common currency has eliminated the risks associated with exchange rates, it increased the stability of financial markets. The introduction of the Euro was accompanied by a sharp fall in lending rates on commercial bank loans that made production and consumer lending much more available. Finally it expanded the demand and supply. Private domestic demand increased even more intensively. In many cases it led to a rise of prices and forward growth of wages in relation to the workforce productivity.
Between 2001 and 2011 labor costs in Greece rose by 33 per cent, 31 per cent – in Italy, 27 per cent – in Spain and 20 per cent – in Ireland. In comparison in the United States they grew by only 11 per cent and by only 0.9 per cent – in Germany.
Wage hike and growth in gove
ment spending in periphery countries...
Euro area symbolizes a strong unit in the inte
ational community which is indicative of the world economy health as well. Nowadays the EU accounts for a fifth part of the GDP and the third part of world trade. For all that what circumstances resulted in enormous financial losses and even recession?
Though the process of financial integration in Eurozone started at 1957, it was the changeover to the Euro that led to the fully integrated financial market. The aim of this step was to strengthen the financial system, to spur business activity and to stabilize economic growth. To some extent these goals have been achieved.
The adoption of the common currency has eliminated the risks associated with exchange rates, it increased the stability of financial markets. The introduction of the Euro was accompanied by a sharp fall in lending rates on commercial bank loans that made production and consumer lending much more available. Finally it expanded the demand and supply. Private domestic demand increased even more intensively. In many cases it led to a rise of prices and forward growth of wages in relation to the workforce productivity.
Between 2001 and 2011 labor costs in Greece rose by 33 per cent, 31 per cent – in Italy, 27 per cent – in Spain and 20 per cent – in Ireland. In comparison in the United States they grew by only 11 per cent and by only 0.9 per cent – in Germany.
Wage hike and growth in gove
ment spending in periphery countries...
The Euro is a symbol of the unity that Europe has so desperately been trying to save recently. This currency is official and binds eighteen countries in the Economic and Monetary Union (EMU), sharing the same market, currency and a unique monetary policy. Several years ago these countries scrambled to find a way out from the financial crisis.
The economic crisis in Europe originated at the begging of 2010 when the European financial markets started to raise fears to the financial position of many members of Eurozone. The critical situation commenced with the breakdown of Greek economy which later on became uncontrolled. It started collapsing and drew the other EU countries into this crisis. It is of great importance to evaluate how inte
al factors in Europe, in particular the adoption of the common currency, created the conditions for the crisis.
The economic crisis in Europe originated at the begging of 2010 when the European financial markets started to raise fears to the financial position of many members of Eurozone. The critical situation commenced with the breakdown of Greek economy which later on became uncontrolled. It started collapsing and drew the other EU countries into this crisis. It is of great importance to evaluate how inte
al factors in Europe, in particular the adoption of the common currency, created the conditions for the crisis.
Daresay that the proposal for budgetary discipline required rather higher degree of integration and commitment towards rules and regulations settled by the European Union. The European community certainly boosted the market after a recent shock and tried to build the Euro as a stronger currency.
It is rather difficult to estimate the place of Eurozone in recent financial crisis towards the countries that suffered from this financial collapse most of all.
On the one hand the policy of the European Union in finding solutions for the way out from the current situation can be called a forced one. From the moment of signing the agreement on the financial aid and implementing the relevant memoranda Greece has stayed under the dictate of the Troika (the European Commission, the European Central Bank and Inte
ational Monetary Fund). Greek economy is under the threat of distraction. The real figures of unemployment have come to 50 per cent. The number of Greeks who have left the country searching any work is estimated from five hundred thousand to one million people. The trade balance has been improved only due to the collapse of import, export has been increased slightly.
On the other hand the decision to enter into the union was a voluntary action for all the member countries. No one could know for sure what the common currency policy would tu
into. Therefore, it is surprised that some countries are still keen on getting into this desirable monetary union, as the practice has shown that it is able to provide neither guaranty of stability nor the prosperity and growth for its members.
It is rather difficult to estimate the place of Eurozone in recent financial crisis towards the countries that suffered from this financial collapse most of all.
On the one hand the policy of the European Union in finding solutions for the way out from the current situation can be called a forced one. From the moment of signing the agreement on the financial aid and implementing the relevant memoranda Greece has stayed under the dictate of the Troika (the European Commission, the European Central Bank and Inte
ational Monetary Fund). Greek economy is under the threat of distraction. The real figures of unemployment have come to 50 per cent. The number of Greeks who have left the country searching any work is estimated from five hundred thousand to one million people. The trade balance has been improved only due to the collapse of import, export has been increased slightly.
On the other hand the decision to enter into the union was a voluntary action for all the member countries. No one could know for sure what the common currency policy would tu
into. Therefore, it is surprised that some countries are still keen on getting into this desirable monetary union, as the practice has shown that it is able to provide neither guaranty of stability nor the prosperity and growth for its members.
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