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The Euro crisis and its impact

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  1. Introduction
  2. The genesis of the Euro crisis
  3. Progression of the Euro crisis
  4. Impacts of the Euro crisis and the lessons learnt
  5. Conclusion and recommendation

The Euro crisis is an economic crisis which not only points to the weaknesses of economic integration, but also points at the consequences of poor economic policies at the state level. The aim of this paper is to synthesize literature on the causes, progression and impacts of the Euro crisis on the European economy. The literature brought out in the paper shows that the Euro crisis is far from over and that the European countries have to rethink about the economic integration strategies that can encourage prudent management of individual economies in the region in order to avoid such shocks. The Euro crisis was seen not only as a financial problem in European Union countries extending from the global financial crisis, but also as a real test of the essence of economic integration. The European Union has come out as a benchmark of economic integration in the whole world. The rationale behind the terming of the European Union and a global benchmark when it comes to matters of economic cooperation and unity among states in the region is that it is the only economic union that has managed to realize the workability of a common currency. However, as mentioned in the opening sentence, the Euro crisis, whose genesis lies in the debt crises that mounted in a number of countries forming the monetary union, namely: Greece, Spain, Ireland, and Italy among others resulted in the replication of the problem across the European Union.

[...] Other countries in the Eurozone totalling to sixteen also followed a similar road. However, most of the efforts initiated by players in the Euro crisis are short term, raising questions about the possibility of developing long term economic measures to prevent a debt problem from occurring again in the future. Farrell & Quiggin (2011) see the short term strategies as necessary for limiting expenditure and ensuring that the bond markets across the Eurozone calm down. After laying blame on Greece for the Euro crisis, most of the European countries agree that saving Greece is a key step in easing the economic pressure in the region. [...]

[...] The reason as to why Germany finds itself at the centre of the Euro crisis is that it depends on the Eurozone for approximately half of its net exports. The financial woes in the Eurozone present a new basis on which the issue of regional economic integration should be reassessed. Walker & Galloni (2013) report on the thoughts raised about the benefits and risks associated with leaving and remaining in the European Union for countries that have been severely affected by the Euro crisis. [...]

[...] These countries needed the capital to finance housing booms and domestic consumption. Since they could not afford to source the finance locally, the only option that seemed feasible to them was to borrow from other countries. Wood (2012) observes that the European countries, especially the countries in south Europe failed to agree on a common framework on which they could opt for the Euro as a common currency. At this point, Germany gets a fair share of blames for failing to exercise a leading role and instead taking a fiscal strategy that plunged the other southern Europe economies in debt (Wood 2012). [...]

[...] To this effect, Münchau reiterates the essence of intense coordination of policy: monetary, fiscal, national sovereignty and regional and global policy so as to avoid a situation where the players in economic integration read from different pages. Melander (2011) is quite pessimistic about the application of the principles of economic liberalization by states in the quest by states to conform to economic integration. Melander uses Ireland; one of the countries that exhibited the problem of mounting debt in the progression of the Euro crisis by noting the fact that Ireland was applauded as a benchmark for flexibility and liberalization in the realms of economic integration. [...]

[...] Salin, P 2012, 'There is no euro crisis', Wall Street Journal, viewed 14 August 2014, Walker, & Galloni, A 2013, 'Embattled countries cling to euro', Wall Street Journal, viewed 14 August 2014, Walker, & Steinhauser, G 2013, 'Control issues: Plans for political union unravel in Europe', Wall Street Journal, viewed 14 August 2014, Wood, S 2012, 'THE EURO CRISIS', Policy, vol no pp. 32-37. Xafa, M 2010, 'Role of the IMF in the global financial crisis', Cato Journal, vol no pp. 475-489. [...]

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