Economic Crisis in Europe

How does stinting Crisis venture European Union and how Does EU Re accomplishments Introduction to the European Union and the Economic Crisis It is a fact world wide that we ar facing an frugal crisis. There are many Countries inside European Union that stool hardly respond to the values of the crisis. The whole commission has to Decide and act properly for all(a) those countries that can hardly respond to the crisis. The depth and breathing space of the flowing globose fiscal crisis is unprecedented in post-war economical history.It has some(prenominal) features in common with akin(predicate) financial-stress driven crisis episodes. It was preceded by relatively coherent period of rapid conviction growth, low risk premiums, abundant accessibility of liquidity, strong leveraging, soaring asset hurts and the development of bubbles in the real res publica sector. Stretched leveraged positions and maturity mismatches rendered financial institutions very vulnerable to cor rections in asset markets, deteriorating loan performance and disturbances in the wholesale gillyflowering markets.Such episodes contain happened in the beginning and the examples are abundant (e. g. Japan and the Nordic countries in the early 1990s, the Asian crisis in the late-1990s). But the key difference between these earlier episodes and the current crisis is its global dimension. ( http//ec. europa. eu/economy_finance/publications/publication15887 ) THE CRISIS FROM A HISTORICAL PERSPECTIVE A unadulterated storm. This is virtuoso metaphor used to describe the present global crisis. No early(a) economic downturn after World War II has been as severe as todays recession.Although a large number of crises have occurred in recent decades around the globe, al around all of them have remained content or regional events without a global impact. So this time is antithetic the crisis of today has no recent match. To find a downturn of similar depth and extent, the record of the 1930s has to be evoked. Actually, a modernistic beguile in the natural depression of the 1930s, commonly classified as the Great Depression, has emerged as a result of todays crisis. By now, it is commonly used as a benchmark for assessing the current global downturn. The purpose of this hapter is to give a historical perspective to the present crisis. In the first section, the similarities and differences between the 1930s depression and the present crisis concerning the geographical origins, causes, duration and impact of the cardinal crises are outlined. As both depressions were global, the transmission mechanism and the channels propagating the crisis across countries are analyzed. Next, the similarities and differences in the constitution chemical reactions then and now are mapped. Finally, a set of policy lessons for today are extracted from the past.A word a warning should be issued forrader making comparisons across time. Although the statistical data from previous epochs are out-of-the- federal agency(prenominal) from complete, historical national accounts research and the statistics compiled by the League of Nations offer house-to-house evidence for this chapter. Of course, any historical comparisons should be treated with caution. There are fundamental differences with earlier epochs concerning the structure of the economy, degree of globalization, nature of financial innovation, kingdom of technology, institutions, economic thinking and policies.Paying due attention to them is important when drawing lessons. (http//ec. europa. eu/economy_finance/publications/publication15887 ) Responses to Crisis In a single market and a huge traffic bloc like the EU, coordination of national economic policies is important. Through such coordination, the EU can act with speed and consistency when faced with economic challenges, as the current economic and financial crisis. Sixteen countries have even one step further by adopting the euro currency.The f ramework for cooperation in economic policy is Economic and Monetary Union (EMU), whose members are all EU countries is a framework within which countries agree common guidelines on important issues of the economy. The last result of the cooperation is much growth, more jobs and higher level of mixer guard for all. Moreover, this cooperation allows the EU to respond to global economic and financial challenges in a incorporate way. The EU as a major trading power, is more resilient to external shocks and, thus, can effectively address the various economic and financial problems.The EU has faced in a coordinated way the current financial and economic crisis, from the first moment occurred in October 2008. interior(a) governances, the European important Bank (ECB) and the instruction work together to shelter their savings to maintain the flow of credit at affordable terms for businesses and households, and to establish a better system of global management of the financial se ctor. The aim is not simply the restoration of stability but to meet that the conditions to re-launch growth and job creation.So far, EU governments have placed more than 2 trillion for the rescue effort of their economies. European leaders have coordinated their interventions, providing support and allowing banks to grant loan guarantees. The EU also increased conjure guarantees for private savings accounts to 50,000 euros. The use of the euro as common currency in many European countries worked very positively during the crisis. Helped the EU to react to the global credit crisis in a coordinated manner and provide great stability than would happen without it.For example, as the ECB could hump interest rates end-to-end the euro area (instead of each country sets its own exchange rate), banks across the EU can now borrow or lend to each other under the same conditions . The euro is used daily by more than 60% of EU citizens Having a single currency was a win-win for abolished the cost of converting currencies at leisure or business trips within the eurozone, abolished or significantly decrease in almost all Where the cost of cross-border payments consumers and businesses can easily canvas prices, thus fostering competition.Participation in the euro zone is a guarantee of price stability. The ECB sets the key interest rates at levels designed to keep medium-term splashiness in the euro area below 2%. It also manages the foreign militia of the EU to intervene in currency markets to influence the euro exchange rate. (http//europa. eu/pol/financ/index_el. htm ) Europe, mistakes and the economic crisis The crisis was born on August 9, 2007, when the European Central Bank (ECB) introduced 95 billion liquidity to markets, while the BNP Raribas freeze ternary investment funds because of subprime had value.The injections are slightly stimulated the patient and the ECB has gained credibility. by from the monetary policy should, however, warned governments to take steps to eradicate the evil and to baffle the liquidity crisis be turned into a solvency crisis. Then the ECB was slow to cut interest rates. When in March the European Parliament held a literary argument devoted to these issues in preparation for the European Council in April, the former Irish Finance Minister Charlie Mc.Creevy had preferred to keep racing Also the percept of Manuel Barrosos role is questionable. Rather than enshrine it in the spirit of community spirit, arrested him as a dead leaf which is led and borne by the wishes of the Council the thrill should declare oneself only what Member States want. The organization of the Commission creates a blind side in understanding this crisis. The macroeconomic and related issues with the markets depend on two different committees.In the European Parliament in October 2006 calling on the Commission to pay more attention to the effects of market behavior on the macroeconomic situation in the euro area. Because there h ad to break the morale of the household, wandering(a) motorized development, and because it was easier not to go a dealer, the governments leave the ECB to intervene totally. Adopt them locomote to the lessons of the crisis are not dealt with the pollution of subprime, the address of which is limited to calls for transparency from banks.But this is different to the rules of the market because it requires players to risk their reputation. Transparency could be only by on-site inspections, for which nobody had the means. In the spring the International Monetary Fund released figures lour in growth in Europe while car sales fell in Germany. In the holy alliance of the European decision maker and the ECB decided that the data were under American influence and too pessimistic. By optimizing the expectations we had in denial of reality.After a serious error assessment of the chaparral administration ran away evil and rotten egg of subprime cut the mayonnaise in the world economy h ave serious economic and social consequences. The decision to leave at the Lehman collapse Vrothers on September 15 caused a systemic crisis marking the death certificate of the Reagan-Thatcher era. In Europe-in this new phase of the crisis-the first reflex was to rescue the Irish, which has decided to guarantee all deposits of banks. Angela Merkel initially denied any plan to support the European banking sector.After Nicolas Sarkozy left alone against the German refusal, Gordon Brown presented his own plan and moved to the Eurogroup. As a former Finance Minister of the main economic spot of Europe, he knew very well what he was talking and was able to combine the governmental imperative for action control mechanisms. Nicolas Sarkozy, who has made Jean-Claude Trichet in the class of head of pronounce or government, seemed to be trying to play a genial of changing the State Monopoly French capitalism, diligence and the media depending on the mood.This was perhaps another(prenomin al) reason why the banks refused the first version of the plan and forced the state to offer loans without taking any involvement. We thus present a colossal plan to support banks without exchange intervention to long-term strategy. There is also a risk that the pressure for reforms to evaporate with a new relative stabilization of markets and argued that any significant change endangers the fragile economies. Finally, the European response to banking crisis leave be in parallel with national plans.An ambitious Commission will undertake to lead the implementation of these projects to be used in a European strategy. Europe can provide the best, the ability of the negligence rules, is the soft power of the modern era that is so necessary by globalization. For this reason the Commission should rediscover the nature and take-back initiatives is one of the great challenges of the adjacent European schedule. (http//www. tovima. gr/default. asp? pid=2&ct=6&artid=23784&dt=18/11/2008 ) E conomic crisis leading to relaxation of EU rules on deficitsThe relaxation of the rules on deficits under the Stability Pact (up to 3% of GDP) in fact go the European governments, as the financial crisis requires more government spending to lift recession. Although the head of the Eurogroup Jean-Claude Juncker said at the meeting of four European leaders in Paris on Saturday that the Stability Pact should be respect in its entirety, is a common belief within the EU that will be tolerated a-temporary-breaching the 3% of GDP as the primary objective in this very difficult international situation is the stability of the system.Officially, most EU leaders insist on fiscal discipline is, but everyone knows that without government intervention the situation will deteriorate and European economies will pussyfoot into recession. The culture that prevails in Europe, captured the French president Nicolas Sarkozy, saying that the implementation of the Pact should deliberate the exceptional circumstances where we are. The exceptional circumstances, according to international organizations, the most serious economic crisis of the Great Depression of the 1930s.This issue will be addressed by the European finance ministers Monday (Eurogroup) and Tuesday (Ecofin) in Luxembourg. The ministers will deal the crisis and will refer to measures taken in their countries to reduce the impact of the credit suffocation. The EU prefers assistance in case and, for the moment at least, does not discuss the possibility of a common reserve fund (suggested and took back then N. Sarkozy) to rescue the banking and general corporate financial industry tested by the crisis.