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The euro crisis
Andrew Jones Local Economy 2011 26: 594 DOI: 10.1177/0269094211421748 The online version of this article can be found at: http://lec.sagepub.com/content/26/6-7/594
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The euro crisis
Local Economy Policy Unit, London South Bank University, UK
Local Economy 26(6–7) 594–618. The Author(s) 2011 Reprints and permissions: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0269094211421748 lec.sagepub.com
´ ˜ Marco Buti, Servaas Deroose, Vıtor Gaspar and Joao Nogueira Martins (eds), The Euro: The First Decade, Cambridge University Press: Cambridge, 2010; 1048pp: ISBN 978-9279098420, £95 (hbk); Roy H. Ginsberg, Demystifying The European Union: The Enduring Logic of Regional Integration (2nd edn), Rowman & Littlefield: Lanham, MD, 2010; 422pp: ISBN 978-0742566927, £21.95 (pbk); Michael Mitsopoulos and Theodore Pelagidis, Understanding the Crisis in Greece: From Boom to Bust, Palgrave Macmillan: Basingstoke, 2011; 272pp: ISBN 978-0230237773, £65 (hbk); Peadar Kirby, Celtic Tiger in Collapse: Explaining the Weaknesses of the Irish Model (2nd edn), Palgrave Macmillan: Basingstoke, 2010; 288pp: ISBN 978-0230237445, £19.99 (pbk); ´.
The Euro cirsis_Aaron’s essay Nov.29th
The proposed Irish bail-out has not calmed the financial markets. And now their attention is moving on to new victims in the Iberian peninsula
Only hours after European leaders have discussed about the bail-out from the EU and the IMF that may measured to $115b. Right after the European leaders devised a rescue solution to deviate from the debt crisis, experts had presented “we think the euro will go down still further”
Their skepticism may be reflected since their unreliability about the euro zone including from Greece to at last Germany. They are worrying the close relationship around euro-zone. In the past, the Greece has gotten the bail-out from the EU and the IMF, in the mean time, the Ireland has been arising as another severe deficit country to be needed.
The most fearful thing is the statue of the euro. The questions are remaining and much more appearing in the financial market. “Will Ireland’s bailout end the euro crisis?” The financial market does not agree that the Irish is not rescued finally the end of the chaotic instability and the investor’s confidence are not recovered over the zone’s future. Europe’s leaders are dealing with only one part of a bigger problem, and only when their backs are against the wall.
In the very nature of EU’s bailout scheme, there are two things here. First, the success of the bailout will depend on the ability of Ireland’s government to impose incredibly severe budget cuts, demanded by its Euro-zone pals in return for the rescue funds. Second, the bailout of Ireland, as with Greece, does nothing to help the economy out of its crisis, aside from preventing an outright default.
In short, the entire bailout mechanism articulated by the EU leaves too many questions unanswered, and thus will keep financial markets nervously.
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Mongelli (2008) has illustrated the extent to which the monetary and economic integration is a part of the broader process of European market integration. He has used the index of institutional integration; first proposed by Balassa (1961). It delineates the five important stages of regional integration. The following five stages are discussed for the founding six member countries of the EU.
The six member countries (EU 6) formed a Free Trade Area (FTA) by removing any tariffs and quotas in case of importing from other members of EU, while retaining the national tariffs and quotas against external countries. The tariffs were abolished in three steps beginning in 1957 and ending in 1968.Stage II
The member countries formed a Customs Union which symbolises a free trade area (FTA) among them and which is characterized by common tariffs and quotas instead of differential national for trading with the non-members. The EU founding members formed a Customs Union since 1968.Stage III
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The EU member countries then formed a Common Market in which they abolished all the non-trade barriers of tariff by promotion of products and services among their internal market. The restrictions on resources- capital and labour were taken off. This promoted the integration of product markets throughout the European Union countries. The formation of European Common Market was already in existence along with the establishment of European Single Market in 1993. Also European Common Market was one of the important objectives of the Treaty of Rome.Stage IV
The EU members later on formed the much complex coordination system of economic and monetary policies named as the "Economic Union" (EU). EU was characterized by a common market (CM) but along with a much higher degree of co-ordination of national economic and monetary policies as well as synchronization of national local legislative and legal system. Thus we can consider EU as an association with a high degree of collaboration on both national and local levels.Stage V
The EU member countries after successfully achieving the development of European Common Market followed the path to Total Economic Integration (TEI) in which the member countries form on an economic union by integrating the related monetary and economic policies at the multinational (cross-border) level, in agreement with the subsidiarity principle. Eurozone is the result of such a comprehensive economic integration. Euro Area works with a common monetary policy and a common currency Euro.Euler diagram of supranational European Bodies Source: Wikipedia (2010) Evolution of Euro
The adoption of a common single currency Euro by the Eurozone in Europe has been under a debate and doubt from world's economists. The earlier concerns were over the less number of countries adopting Euro currency as their functional currency. This has obviously proved wrong with 17 of the 27 EU member countries joining Eurozone and Euro as the currency. At the end of 1992, Europe had developed the European Single Market. This raised some serious concerns in the US economy as a common European Currency would arguably challenge the US dollar as their national currency. This initiative was also termed as creation of "Fortress Europe" Portone (n.d).
The introduction of Euro is also considered as one of the biggest turnarounds in the European Economic Integration efforts because it provides the member countries a platform to work in cooperation in order to develop and prosper on the basis of partnership. It began with eleven EU member states achieved the convergence requirements and were allowed to join together and form the Eurozone with an official launch on 1st of January 1999. Later on Greece qualified on the convergence criteria in year 2000 and was subsequently allowed to join the Euro area on 1st of January 2001. Until now the integration was made into the monetary system. The actual coins and notes currency was available from January 2002. The countries which made it to Euro area later on include Slovenia on 1st of January 2007, Cyprus and Malta on 1st of January 2008, Slovakia on 1st of January 2009 and Estonia on 1st of January 2011. Thus the total membership of Eurozone is 17 as of today and a population of 329 million citizens in Eurozone.
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These achievements mark the long term goal and dream of the European nations to become completely integrated into a single common European market functioning on a single currency. With its inception, the Euro currency of Eurozone had begun to produce good economic results for the Eurozone members. Keeping the economic rationale behind uniting the European countries within a single currency system, on the other hand the motive is also political which aimed to unite the European citizenry in the process of integrating the European nations.
The former Commission President Jacques Delors said that "the introduction of the euro has created "the perception of an emerging European identity." The successful establishment and development of the Eurosystem is the most significant aspect of European economic integration as it is the most perceptible developmental factor of the European Union amalgamation and Eurozone formation. It is sometimes viewed tantamount to 50 years of integration attempts put together into one phenomenon. However looking at the deep financial crisis Eurozone is experiencing, it is important to consider the weaknesses of such an extensive connection among different economies of the Eurozone [The Gallup Organization (2006)].
Eurozone is designed to promote the inter-country competition and thus enhance the optimum, effective and efficient allocation of resources within the unified European Common Market. This had led to the enlargement opportunities being provided to the other non EU countries. More countries were expected to join the Eurozone; however the future looks slightly on the bleaker side with the extensive devastation in the Eurozone crisis that has its root in the financial collapse of one of the member country of Eurozone, Greece.
Source: Crane & Chandler (2005)Anticipated advantages of the Euro Currency
The common single currency Euro of the Eurozone is essentially an instrument to boost political cohesion among the European nations and a common agreement among the European citizens. It is important to notice that apart from integrating and unifying the Eurozone nations, it supports the cause of national integration on both political and social levels. Apart from providing the economic leverage it by assimilating the economies of participating states, it eventually also works for the betterment of the European Union that just economic development.
The Euro currency's advantages include the following important factors:
1. Eliminating the risk arising from the currency exchange-rate fluctuations - Prior to the formation of Eurozone, the consumers (retail or business consumers) entered into an agreement and committed to make a purchase in another country at any time in the future (which means at the future prices), there used to be a probability of having to pay higher (which can be much more than expected) which means the possibility of losing money due to exchange rate fluctuation. This problem was solved by introducing the common euro currency.
2. Higher transparency in the European Single Market - Eurozone demands the participating countries to adopt fair and transparent measures in relation to the products and services prices as well as labour wages in different countries. It calls for price equalization among the countries, thus making the businesses become more competitive and offer the customers a better deal. This has made it much easier for the customers to judge which is the better deal because comparison has become more realistic.
3. Lower transaction costs - Europe is famous for its tourism industry and the economic strength it offers to the European Market. Every year a huge number of tourists travel across the borders of the European landscape. The primary cost incurred used to be the exchange of their country's currency into the country they used to travel in. It meant an increase expenditure in case of multi-country travel as an exchange would be required at every nation entry.
4. Cross-border employment opportunities - Eurozone allows for various businesses to be conducted across national borders more conveniently because of the inherent standardization and also the workforce can be more easily employable into different countries. Euro currency makes it less unwieldy for labour to move into another country to seek work and earn incomes and it means the same because Euro is their national currency as well.
5. Expanding market area for doing business - With the coming of Euro currency it has become easier for the business organizations to expand into different neighbour countries without much complication. The companies need not employ separate accounting systems, banking institutions for different countries for performing business transactions in other countries. Euro makes it simpler for businesses to operate in the Eurozone.
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A specter is haunting Europe -- the specter of deflation. Countries throughout the European Union have been struggling for the past several years with stagnant or falling prices. In Hungary, inflation has fallen to its lowest level since 1974. In Bulgaria, Cyprus, Greece, Ireland, and Latvia, consumer prices fell on a year-over-year basis in 2013. Over the same period, consumer prices remained static in Portugal and Spain, and they rose by the statistically insignificant rate of 0.5 percent in Denmark, Lithuania, Slovakia, and Sweden. Aggregate inflation in the EU has declined to a five-year low of 0.5 percent, well below the target of two percent set by the European Central Bank (ECB).
As long as incomes remain stable, deflation has a positive impact on consumers’ purchasing power; they can buy more goods and services as prices fall. Their savings also increase in value as prices decline, unless banks begin to charge negative interest rates -- basically, a fee for holding money. But deflation can be devastating for citizens with loans: as the value of their money remains stagnant or even decreases, they must continue to meet their debt obligations, the nominal value of which does not change. At the same time, whatever assets they have pledged as loan collateral decline in price, prompting lenders to demand further security against default. Deflation is also bad news for individuals and companies who do business across borders. Imports may become more expensive, and exports can generate lower revenues. Deflation also threatens citizens and companies with loans and other credit facilities.
For evidence of the ill effects of deflation, look to Japan in the 1990s, which closely resembles Europe today. There, too, the financial sector struggled under a large burden of bad loans. Like Europe, Japan also faced an aging population that consumed less. Another disquieting similarity is thatLog in or register for free to continue reading.
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Ever since the economic crisis has hit the most developed and prosperous economies of the world, there have been experts trying to research and suggest all that went wrong. It is indeed comparable in magnitude with the Great Depression of the 1930s.
The turmoil began in year 2007 when financial institutions of large scales were threatened to face a total collapse. Many banks saw bailouts by national governments and stock markets across the globe went into bad state. The two bears Stearns Hedge funds collapsing in the summer of 2007 were categorized as mortgage crisis. This started an era of credit crunch, private defaults and huge layoffs in organizations.
Globalization spread the crisis across the world and media began to cover it extensively. Writers and economy experts sought several reasons responsible for the financial crisis. While some attributed it to the global trade imbalances between the east and west, others held the expansion of “casino” banking in London and Wall Street responsible.
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Relating all the events that were behind this economic failure to a single aspect of political economy was what challenged various writers. British banking crisis that began with BNP Paribas’s collateralized debt obligations bag triggered the start of this economic turmoil that spread all across the world.
Economists at the time failed to see the obvious economic problems of today. Facts and studies prove that banking sector and financial globalization have given way to this economic downturn. Mr. Peston, the eminent journalist to become BBC’s chief editor was the one to foresee Northern Rock, a British bank busting. While British taxpayers had to bear a subsidy of as much as £ 914 per person, as per a report from a Bank of England economist, Andrew Headland; the stock performance had no impact on the spiraling executive pay as per a consultancy named Obermatt.
Not only banking but also housing market suffered a blow in some areas. Foreclosures, evictions and unemployment became a common affair. Many key businesses failed and consumer wealth went in loss for trillions of US dollars.
Economic activity slowed down to an extent that from the period 2008 to 2012, a state of global recession was faced. European Sovereign was in a debt crisis in this duration. Some experts comment on the European Union’s model, the culprit. It concentrates all monetary policies in European Central Bank while the fiscal policy is left to individual member countries.
Member states cannot recover from the monetary policy levers. In scenario like one that prevailed where different countries faced recession differently, common monetary policy will benefit some countries and not others.
Greece was into debts even when it joined Euro in 2001. Joining EURO may have lowered euro debt rates, but economic boom brought no positive results as borrowing rate and interest rates remained low and debt went on going high.
Greece was in a deep buried financial crisis and the Prime Minister in 2010 had to ask International Monetary Fund and European Union to give them a rescue package. Inspire of the bailout given by the E.U. and IMF, the situation did not improve further and France and Germany had to declare another bailout package. Italy and California has lost natural resources owing to bad governance. ECB’s tight monetary policy has worsened the state of affairs in Greece, Italy, Spain and other nations facing debts and fiscal challenges. Spain and Ireland experienced real state bubble and their otherwise safe financial sector.
Not only Europe but Asian countries like Japan also faced worst recession in recent times and had to struggle hard to rebound it. Problems with China and seismic disasters were challenges for Japan.
There are many consequences of a surprise in Euro exit for the countries which may think that it is solution. Before everyone would get their money out of the banks, exports and imports would shut down and lending of money would stop causing many firms to go bankrupt. Economic chaos would prevail and the effects would ripple entire Europe.
On the other hand, looking at the positive effects, leaving the euro would mean that a country can ignore the demands from the leaders of the other Euro nations. Long –term benefit could come to the weaker countries in the continent. The problem of crisis isn’t so simple to resolve and an excellent plan must be prepared by countries planning to leave Euro without having to suffer the ill effects at large.
p Explication of theme in erasure by Percival Everett. Theme is family
Whether Racism is an issue of not in USA (also in some Western Countries. it is a flourishing business. The Black are aware of this fact and do not hesitate to take `un 'due advantage of the situation. When a Black writer takes on another `black ' writer. the basic issue. the calamity of being a Black. is intelligently swept under the carpet or the issue will be highlighted with a thick coat of extra Black. for the purpose of competition. I
remember a three-time divorcee also a scholar in the oriental language Sanskrit. comment on the theme family. Marriage is the foundation stone for a happy family ' he said and then went on to dissect the word `Vivaha (marriage. `Vaha ' means to flow and `vi ' means harmoniously together. Therefore. the word `Vivaha ' means to flow together harmoniously. Two distinct individuals two separate personalities. bred. born and brought up in different set of circumstances try to come together from that day onwards to find a common identity. a common goal. and to be precise a common all. he said .---thank for you support to the institution of marriage. the three-time divorcee that
An author. when he decides to write the novel. has the issue and theme hovering in his mind. His being an author is itself the major issue Howsoever detached he claims to be. he can not avoid himself. from the word go to the last sentence of the novel. The next importance issue is the influence of the family. an important family member or members
Percival Everett is a Professor of literature and Head of the English Department at the University of Southern California and the author of fourteen previous novels. He is the Ellison in the novel under review
`Ellison faces personal and family crises - most notably. his aged mother is fast succumbing to Alzheimer 's and he is also struggling to understand his father 's suicide seven years before. The first 10 pages of the book relate to conversation between brother and sister. brother and brother and other personal issues. This is the first indication of the firm attachment the author has for the family. or say the `joint family ' The book is an entertaining mix of serious issues clubbed with personal affection and parody. The `family ' thread appears and reappears in the novel in one form or the other
Everett had a strong provocation to write this novel. The badge of suffering that had been a part of the Black family not many decades ago in U .S. comes to the fore in the very first page of the book. He writes I have always been severely put off by any story which had its main character a writer (To an extent it is true of this novel also ) So. I will claim to be something else. if not instead. then in addition. and that shall be a son. a brother. a fisherman. an art lover. a woodworker If for no other reason. I choose this last. callous-building occupation because of the shame it caused to my mother. who for years called my pickup truck a station wagon ' - the familial bonds are subtly explained and given importance to (p .1 )He novel is a parody of contemporary African-American literature. It contains excellent s on authentic family /social feelings with depth and emotion My Pafology was initially submitted to the Agent under the gangsta pseudonym Stagg R .Leigh. This one `wrong ' step leads to a series of comical. problematic situations later as the novel climbs the ladder of unprecedented success
`Thelonius "Monk " Ellison. author of experimental novels. is somewhat estranged from his family because he was favored by an emotionally distant. recently deceased father. When his sister is killed. Monk returns to Washington. D .C. to care for his mother. who is in the early stages of Alzheimer 's disease ' The graphic as to how he tackles the family crisis. clubbed with the professional crisis. with the burden of seventeen ejection slips for his novel. which later turns out to be a monumental success. keeps the reader glued to the novel Monk 's main character is an Ebonics-spouting brute with no regard for his four children or their respective mothers
Everett is an enormously talented writer. who juggles with the serious issues related to Black race and other problems faced by US with ease and makes you ponder and giggle at the same time. His wit. the mode of criticism and sarcasm are worth noting. The ideas are engaging and he has intelligently roped in the black community and the white community his sweet-bitter comments on the US social system merit careful attention. though he says it with a hilarious authenticity br
p References Cited
Everett. Percival. Novel. Erasure
Publisher. Hyperion (October 2. 2002