Tag: economic

Eurozone Crisis in 590 words

The Eurozone Crisis was an economic crisis that occurred in Europe as a direct result of the US housing market crash in 2008. In short many European bank invested in the US housing market and in 2008 the US housing market crashed meaning it’s value dramatically dropped and European backs were left with property that was nearly worthless. Effectively what this means for the European banks is that they essentially lost large sums of cash and needed to be bailed out by national governments

Due to this crisis national government of Europe had to bail out their banks because the US housing market crashing. It was discovered in these difficult times for Europe that Greece had a large dept problem, the Greek government admitted to having a large dept which stemmed from poor collecting of taxes and corruption. Greece wasn’t able to bail out their banks thus other members of the European Union had step in and chip in to pay off the the Greek debt. It is repulsive to say the least that the national governments of the European Union have to bail out bankers in order to keep their economy flowing but it is more repulsive to know your own government cannot bail out the banks without a loan because they can’t afford to bail out the banks.

Germany, the economic pillar of the European Union alongside with its many allies from the EU aided Greece by sending Greece large care packages of cash. In reality the care packages are loans meaning Greece has to pay Germany and all the other EU members, in reality what this means for Greece is that they have to pay back all these loans. In addition, the European Central Banks decided to buy government bonds from the EU member states which suffered the most from the crisis (such as Greece, Italy & Spain) to aid the EU’s economies from nearly collapsing and starting a domino effect that could eventually affect other members of the EU. The decision by the European Central Bank garnered much criticism especially by a group of German eurosceptics due to the European Central Bank spending 2.1 trillion euros in the last 4 years in order bailout EU member states and the case was taken to court to the European Court of Justice in which they ruled in favor of the European Central Bank .

It is easy to blame Greece and say that they should leave the Eurozone or blame the banks because of their greedy investments, in reality it was a combination of all the disjointed decisions that enabled the Eurozone crisis to occur. The Eurozone crisis revealed larger problems of cohesion and transparency in the cogs of the grand machine that we refer to as the EU. It cannot be understated the huge oversight in part by the EU nor should we hold their identity to that mistake. Credit should be given and it should be given where it is due to the
European Central Bank and the EU member states that contained the situation from spilling over.

References
Landler, M. (2008). The U.S. Financial Crisis Is Spreading to Europe. Retrieved from https://www.nytimes.com/2008/10/01/business/worldbusiness/01global.html
Kosakowski, P. (2019). The Fall of the Market in the Fall of 2008. Retrieved from https://www.investopedia.com/articles/economics/09/subprime-market-2008.asp
Eurozone crisis explained. (2012). Retrieved from https://www.bbc.com/news/business-13798000
Bloomberg. (2015). The European Debt Crisis Visualized [Video]. Retrieved from
https://www.youtube.com/watch?v=j4_tyEl84IQ
Carvalho, R., Ranasinghe, D., & Wilkes, T. (2018). The life and times of ECB quantitative easing, 2015-18. Retrieved from https://www.reuters.com/article/us-eurozone-ecb-qe/the-life-and-times-of-ecb-quantitative-easing-2015-18-idUSKBN1OB1SM
Greek bailout crisis in 300 words. (2018). Retrieved from https://www.bbc.com/news/world-europe-45245969
Sinner, M., & Canepa, F. (2018). ECB wins court’s backing for buying government debt. Retrieved from https://www.reuters.com/article/us-ecb-policy-court/ecb-wins-courts-backing-for-buying-government-debt-idUSKBN1OA0Q0

Europe: Income inequality on the rise

National wealth increased over the European countries in the 21st century, but the inequality between the wealthiest 1 percent and poorest 50 percent is more noteworthy than it was in the 1800s. Well, what does income inequality mean for the future growth of Europe’s wealth? Today, the top 1 percent income growth has doubled, but due to globalization, it has not for the unlucky 50 percent.


“ This opens the door to political entrepreneurs who try to set ‘the people’ against the ‘ruling class.’”

(Chhor, 2018)

While in Europe, as gross income inequality has diminished over the last two decades, both income inequality and unemployment have remained high in some member states on a country-by-country basis (Wolff, 2016). Income inequality is utilized as an indicator of a country’s national wealth; income inequality in European countries means limited opportunities for citizens. Income inequality results from various problems, such as unemployment, which is particularly high in the southern EU member states (Wolff, 2016). Unemployment is stagnating in the Member State’s economic growth state and greatly discourages young people from entering the labor market and pursuing their career. Unfortunately, unemployment has the most significant impact on children; children who live in a house with unemployed parents tend to have poor results at school. At the moment, the effects on children do not appear to be obvious, but they are of greater importance for life expectancy and future quality of life in Europe.

In addition, income inequality is crucial for society, as it conveys an air of unrest that can influence people to favor the vote of populist political parties over other alternatives (Chhor, 2018). The sole purpose of populist political parties is to exploit the feeling of public dissatisfaction and to exploit their vulnerabilities to achieve a government position in national elections. Populist political parties claim to be the voice of the public that works exceptionally well in times of crisis or events that can drastically affect a Member State, such as Brexit (Wolff, 2016).

Finally, when discussing income inequality, pensions need to be addressed, as they contribute most to redistributing the country’s wealth. Currently, pensions account for almost 50% of the EU inequality fiscal policy (Inchauste, 2018). On the one hand, although pension expenditures in Europe have increased or remain the same, spending on families and education has decreased to achieve better pensions (Wolff, 2016).

What does income inequality mean for the future growth of European prosperity? In sum, it can be said that economies are stagnant due to high unemployment, difficult labor market penetration, and the poor performance of children in school. Populist parties gain greater favor and are influenced by the European public in Europe. Higher pension expenditure, but at the expense of reducing family and education spending. These three points must be taken into account when discussing the obstacles that Europe must overcome to ensure its wealth in the future.

References

Darvas, Z. (2018). This is the state of inequality in Europe. Retrieved from https://www.weforum.org/agenda/2018/05/european-income-inequality-begins-to-fall-once-again
Commission, E. (2019). Publication of the FEAD mid-term evaluation. Retrieved from https://ec.europa.eu/social/main.jsp?langId=en&catId=89&furtherNews=yes&newsId=9331
Inchauste, G., & Karver, J. (2018). Fiscal Redistribution in the European Union. World Bank Group. Retrieved from http://pubdocs.worldbank.org/en/632981520461235859/EU-IG-Report-Fiscal-Redistribution.pdf
Chhor, K. (2018). Income inequality, financial crisis and the rise of Europe’s far right. Retrieved from https://www.france24.com/en/20181116-income-inequality-financial-crisis-economic-uncertainty-rise-far-right-europe-austerity