Do we have a problem with Euro area?

According to the recent reaserch that what seemed impossible, now could become a serious threat.  In my opinion  problems, which countries have with Euro currency  have started  earlier but the dominating and the winning stroke was the situation in Greece.

The preparation of the aid program to Greece in the short term has helped to reassure investors, but will have much more serious consequences in the long run. In 2011 financial needs of individual members the Euro area will be record high. France and Germany are one of the countries which pretending to have the biggest deficit in amounts . With reference to GDP the biggest  debtors will be Spain and Ireland. It seems that Germany, France and other Benelux countries pay the bills for  extravagant spending  “southerners”.  But the problems of Greece are just a tip of the iceberg. Economists claim that rapid cuts in expenses and raise taxes are inevitable. It’s hard to believe that Portugal with the total debt of private and public sectors over 300 percent of GDP or Spain with almost a 20 per cent  unemployment will fastly manage with that crisis.

Trying to force through most inconvenient reforms for Euro area members like excluding –  for transitional period – the country, which breaks terms of the Maastricht Treaty, seems impossible nowadays. What European Union could do to improve situation in union monetary area?

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2 thoughts on “Do we have a problem with Euro area?

  1. To answer to your last (rethorical ?) question, which is “What European Union could do to improve situation in union monetary area?” :

    First, as EU has already started to do, we will obviously have to deeply reform and restructure our financial and monetary markets. As you know, since the crisis, the EUR currency has gone wild up, as a counter effect of the USD loss of value. This will attract lot of money to europe, but will defintely set an Handicap on EU exports.

    Besides, as we discussed in class, there are a lot of reforms currently over process. Then, Greece public finance crisis may not be a problem, but only a symptom of a bigger one. States should learn how and when spend and save money. A solution would be the creation of a kind of “EU Monetary Buffer” which could absorb crisis’monetary effects and offer an additional investment amount in more quiet times.

    Also, these are only thumbnails of a bigger picture that could be discussed for hours. But solutions exist, and governments need to act accordingly to their actual comitments and converge to find a solution as whole, and not only hot and quick actions here and there.

    My 2 cents 😉
    Peace !

    J. Garcia

    Reply
  2. I think that we do not have such a big problem with Euro area if we compare it with USD. Euro is still keeping his value. But it is true that right know we do not know, how much the Euro value has fallen first because of Greece and second because the Spain is struggling with some big problems too.
    As we know the European Union already started with programs and reforms to recover and restructure financial and labour market. I have to say that Garciaaa has add a really good idea about the creation of a kind of »EU Monetary Buffer«.
    I think that after the crisis the euro is going to be one of the strongest values of the world, but to get to this level a lot of discussion and reforms have to be done.

    Reply

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