...Kai “The euro was a bad idea from the start. Now it is only a matter of time before the Eurozone falls apart.” Introduction: The international financial crisis in United States in 2008 is not over, then the sovereign debt crisis broke out in Euro Zone, the world economy is going through a difficult period of adjustment, especially euro area reached the point of exhaustion. According to this, some economists hold opinion that the Euro Zone was a bad idea from the start, now it is only a matter of time before the Euro Zone falls apart. This essay aims to analyze the positive and negative effects of Euro and finally to illustrate that the existence of the Euro Zone is necessary and correct. The advantages for the Euro Zone members Firstly, the most significant advantage is that the unified currency will greatly promote the mobility of goods and factors of production between the member states in European, which will further increase the resource allocate efficiency, create a robust competitive environment. Nowadays, the openness between euro members is increasing rapidly. According to the statistics of World Bank in 2011, the mutual exports between EU members accounts for 10%-25% of its output. In addition to this, the use of euro will reduce the costs in international trade among EU countries and transaction costs for collecting, processing, and analyzing the foreign exchange rates. Moreover, although there is a unified market within the European Union before the Euro Zone has...
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...www.capitalvia.com G lobal Research Limited I MPACT of G REECE White Paper - Impact of Greece Crisis Global Research Limited Introduction Historically, financial crisis tend to lead to sharp economic downturns, low government revenues, widening government deficits, high levels of debt, pushing many governments into defaults. This is called SOVEREGIN DEBT CRISIS. GREECE is currently facing this, it accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid. As the crisis has unfolded and there was liquidity crunch in world economy, Greece may no longer be able to rol over its maturing debt obligations. Build – Up To The Current Crisis Between 2001-2008, Greece reported budget deficits averaged 5% per year, compared to Eurozone average of 2%. Also, its current account deficits averaged to 9% per year compared to Eurozone average of 1% Greece funded these twin deficits by borrowing in international capital markets, leaving it with chronically high external debt (115% of GDP in 2009) Some of the facts which can be depicted from following charts : www.capitalvia.com 2 White Paper - Impact of Greece Crisis G lobal Research Limited How Country Debts And Budget Deficits Compare? Projected budget deficit for 2009 Budget deficit figs as % of GDP Debt as % of GDP 68.6% UK 13% 112.6% Greece 12.5% 54.3% Spain 11.25% 65.8% Ireland 10.75% 114.6% Italy ...
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...“Euro: A common currency used by many European countries. The euro was established in 1999 when 11 European countries adopted a common currency in order to facilitate global trade and encourage the integration of markets across national borders. Euro banknotes and coins began circulating in January 2002.” (The Financial Dictionary) “The euro was introduced in 1999 and became the official currency of participating nations in 2002. It was intended to remove the exchange rate risk of businesses participating in the EU's common market and free trade association. It has become one of the world's most important currencies. Proponents of the euro state that it is more valuable than the former currencies, while opponents say that it has made goods and services in their home countries more expensive. The euro's ISO 4217 code is EUR.” (The Financial Dictionary) According to the European Commission Euro currency, the euro is currently the single form of money shared by 17 of the European Union’s Member States, this makes up the euro area. The euro was introduced in 1999 and was a major leading step in European integration. The euro has many major benefits; some of these are the sharing of a common euro currency which is enabling the less expensive and simpler inter-nation trading. This common currency also allows less fluctuations and a lesser risk. In Global terms the U.S. dollar is the leading currency and now the euro is the second most important with the Sterling British...
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...and Answers on the Eurobond - Full analysis |More Services | Eurobonds are essential to save the euro, yet a flawed structure will produce adverse effects. We must see what needs to be done, what to be avoided. | In explaining the new order of things in the systemic crisis of the euro I concluded saying that a series of structural reforms in the architecture of the euro need to take place. Among them was/is the introduction of the eurobond. The eurobond is quite a vague and broad concept since it has never taken material form before. It therefore creates a number of questions as to its form, the body responsible for its issuance, the relations between it and the states, the sovereign debt of euro countries and whether it will be mutualized, what are the dangers etc. All these arguments are legitimate and bear a certain truth in them, yet without putting everything into context we can never reach a verdict and decide whether to adopt or reject the option of the Eurobond. In my discussions with my readers and with other Europeans, as well as in my research across the Internet and the European blogosphere, I have gathered a number of common questions that are raised. I shall attempt to provide answers to these questions in order decide whether eurobonds are the only way out of this dead-end that Europe has reached. (To view a concrete proposal for saving the euro, within the current institutional framework, one that will not imply any fiscal transfers or any pooling...
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...Greece Should Not Exit The Euro Zone In recent years, there has been an ongoing debate over whether Greece should exit the Eurozone or not. The reasons are the seemingly current inability of Greece to compete within the euro currency, its tremendously high amounts of government debt which is on the verge of default, the inability to pull through with the anticipated austerity measures and the acceleration of the downward spiral of the Greek economy. Up to now, a so-called Grexit has not taken place due to repeated bailouts by the EU, represented by the European Financial Stability Facility (EFSF) and the European Central Bank (ECB) as well as the International Monetary Fund (IMF). The debate whether a Grexit should happen in the future is one of importance, as it would not only have many implications on the country itself, but also on the remaining countries in the EU and on the global economy. Many of these implications would affect Greece as well as a majority of other countries negatively and thus the Grexit should be one to prevent. The key points in this context are that firstly, that Greece would suffer greatly from the reintroduction of the drachma due to an immense depreciation and resulting decreasing value of the currency, which would lead to business closures and essentially an increase in poverty. Secondly, the global economy would be affected negatively by a Grexit due to a potential global credit crunch as well as the debt default. Thirdly, there are still measures...
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...FIS 200 Entire Course For more classes visit www.snaptutorial.com FIS 200 Appendix B Personal Money Matters FIS 200 FINAL FIS 200 Checkpoint: History of Banking FIS 200 Movie Summary FIS 200 Paper Money Power point FIS 200 Assignment: Price and Value Agreement FIS 200 Assignment: Social Money FIS 200 Check Point: The Euro FIS 200 Working Money FIS 200 Week 1 DQs FIS 200 Week 3 DQs FIS 200 Week 5 DQs FIS 200 Week 7 DQs FIS 200 Capstone -------------------------------------------------------------------------- FIS 200 Assignment Price and Value Agreement For more classes visit www.snaptutorial.com More than likely, the consumer will have the choice of what product they buy, and for how much. Along with that choice, comes compromise. We are all aware if top of the line appliances, cars, clothe just as much as generic cereals, generic clothing brands. Throughout the assignment consider what gives the commodity its value. --------------------------------------------------------------------------------- FIS 200 Assignment Social Money For more classes visit www.snaptutorial.com Due Date: Day 7 [Individual forum] Almost every relationship involves money in some way. Many relationships are created because of money, from marriages to business ventures to international relations. Think of your own relationships, from personal to social or business relationships, and evaluate the role money plays in those relationships. ...
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...cultural events related to particular country. The exchange rate will move positively or negatively dependent on how adversely each of these factors cause change to the currency’s spot rate. Throughout our evaluation of the Great British Pound, we were able to track and measure how each of the factors caused change in the currency’s value. Over the past four months we have seen a significant decrease in the value of the British Pound. As will be explained in this paper, many different factors caused downward pressure to be placed on the currency. Expected changes in the political structure of Britain causes some to feel unwavering about the future, especially when the current monetary and fiscal policies are not resulting in a positive outlook for the economy and especially the vale of the currency. Supply and demand for the currency will change as the currency appreciates and depreciates due to the country’s varying stages of surplus’ and deficits. These and other economic forces will be developed throughout the paper to analyze and interpret how the British Pound has changed over the first couple of months in 2013. Historical The pound sterling, commonly known as the pound (GBP), is the official currency of the United Kingdom. It is the oldest currency still in use as it was created in the Anglo-Saxon period where it was equivalent to one pound of silver (Dawnay, Kit). Over the years, the currency has evolved. In the late 17th century it was unofficially tied to gold and...
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...I The problem Adoption of a common currency in Europe In the 1990's the major European countries decided to have a common currency. They carried out their plan in two steps, first for business transactions in 1999, and then for all citizens, beginning January 1st, 2002. In broad outline, countries set aside the currencies they each were using previously and instead dealt themselves euros. From then on the so-called eurozone had a single currency, a "unique money". In the 2000's Greece and other countries joined the group. Greece undertook the same operation. It relinquished its drachmas and received an equivalent amount of euros. We explain below technically the issuance of a new currency, but for the time being what's important is the result. Henceforth Greek firms and Greek citizens could buy goods and services anywhere in the eurozone with their euros. Let's see how this lead to the present monetary crisis, and what is likely to happen next. Continued Greek budget and trade deficits, borrowing euros To understand the problem of Greece, we ought to distinguish monetary flows within the country from those across borders. They entail different accounting records, liabilities and problems. And within the country, let's focus on one very special economic agent, the government, the revenues of which normally come from taxes. * Within the country: the Greek government kept its economic policy which consisted in spending more than it received from taxes and minor state entrepreneurial...
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...that there was not a genuine underlying crisis in Portugal. (Fishman, Robert. The New York Times (The Opinion Pages) Portugal’s Unnecessary Bailout. April 12, 2011) The truth is that Portugal has had an underlying crisis for years but has managed to shift from the global public eye. According to David R. Cameron, professor of Political Science at Yale University, “there has been a recurring imbalance between spending and revenues.” This leads to my first solution, which is to have Portugal abandon their current fiscal policy. This would help cure the numerous “excessive deficits” that they have accumulated since 2002. (Cameron, David. The New York Times. Portugal’s Economy. April 18, 2011.) Like Greece and Ireland, Portugal adopted the euro currency a decade ago meaning that they forfeited their monetary policy. With the current Eurozone crisis that is occurring, my second solution would be to have Portugal revert back to their former...
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...disadvantages of adopting the Euro. A case study of The UK I. Introduction According to European Commission (2011a), a new common currency in Europe was announced on the first day of January 1999. At that time, there were eleven European countries decided to join the Euro and the Euro was introduced instead of their own currencies. The Euro has been adopted as a main currency of the country members, including Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxemburg, the Netherlands, Portugal and Spain. In order to be accepted to use the Euro, these countries had to agree with the conditions called “convergence criteria” about the price and exchange-rate stability, long-term interest rates, total government debt, government budget deficits, and central bank independence. These aspects will be discussed specifically in this essay. In the early stages of announcing and using the Euro, four members of the EU still remained separate from the Euro, namely Denmark, Great Britain, Greece, and Sweden. Later, in 2000, Greece changed its decision to accomplish the agreement. In 2001, it started adopting the Euro. At the present time, there are 17 out of 27 EU countries using the Euro as an official currency, which makes it become one of the most important currencies in the world. In the future, apart from Denmark and Britain, all other members of the EU will adopt the Euro. It should be known that only Latvia and Romania have a target date for joining the Euro in 2014 and 2015 respectively...
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...appreciate the operations of the ECB in managing the money supply and effectively stimulating necessary changes to proceed with a carry trade strategy. The ECB having direct control of the money supply enables them to increase the money supply through looser monetary policy, for example. This is seen graphically in Figure 1 of appendix A [krugman, Obstfeld & Melitz, 2012]. From the graph we can see the Australian money market is initially at equilibrium at point 1 and the foreign exchange market at 1’, equating to an exchange rate of E$/€1. Now with the ECB action we illustrate the increase in money supply by a shift to the left of the expected Euro interest rate. Foreign exchange market equilibrium is now at point 2’ with a new exchange rate at E$/€2. Hence the Euro depreciates against the Australian dollar. The expected dollar return of Euro deposits is now lower and hence less attractive in comparison with the more lucrative Australian dollar deposits [krugman, Obstfeld & Melitz, 2012]. This creates the situation whereby investors can borrow a financial...
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...Critical Thinking Final Project Eric Brown Critical Thinking Term Paper Anania Harutyunyan and Bence Csosz April 8th 2010 Montenegro’s Euro Challenge The article we found in the Business Press is about Montenegro’s unilateral adoption of the Euro, what is wrong with it, what arguments are there for it and against it. To have closer insight to the argument we have to know what Unilateral Adoption of a currency is. It’s when a country uses the currency of another country or another monetary union without the country’s or monetary union’s official acceptance which is the case of Montenegro, more specifically “unilateral euroization” without meeting the Maastricht criteria and without getting the European Union’s approval. In 2002 when the Euro was launched as the official currency for the countries in the European Monetary Union (EMU), Montenegro started using the euro as well without any approvals. The European Central Bank and the European Union strictly forbid the unilateral use of the Euro with very few exceptions like Vatican which is religious governing state in the Italian territory. They have some basic arguments why other countries should not use the Euro. The main argument is that it would undermine the principal of equal treatment, as any physically speaking “European” country has to be a member of the European Union and then apply to be in the European Monetary Union which has the five Maastricht requirements which ensures that the specific country has...
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...Macro Economic Analysis of the Rise and Fall of Euro Zone Currency Journalist Alen Mattich wrote in the 17 September 2010 edition of Wall Street Journal regarding the economic conundrum facing the Euro Zone with the imminent default of Greece on their national debt. His article, entitled “Trust Greece…to Default,” outlines the failing monetary policy of the Greek government and the quazi-demands for a national bailout made by Finance Minister George Papaconstantinou. If the Greek economy collapses absent perpetuated bailout from other powers, the European universal currency will collapse. The intrinsically diverse European economies, ranging from moderate command-and-control orientation to heavy market influence, defy conglomeration and governance with a single currency. The uniform currency experience has ended in disaster. Because the Euro Zone effort to implement a homogenous monetary policy in a heterogeneous international body is economically untenable, the Euro as a currency will collapse. In 1986, European countries gathered together to initialize the ‘perfectly integrated competitive market economy’, using principles developed by economist Robert Mundell in the 1960s. These concepts emphasize liquidity of physical and financial assets, flexible interest rates, comparable business cycles and asymmetric fiscal policies for use in creating seamless interaction between international bodies within the economic area. This ‘Euro Zone’ exists as the pilot project of sorts for...
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...set profit goals (targets) and was able to expand further d) The company had done inter transfer of goods between two regions, from France to Spain, based on cost plus method of transfer pricing e) France entity had expanded into a new venture of distribution arrangement, which was not a part of Compagnie’s core business All the above factors along with the unique circumstances that led to Spain’s dismal performance call for right criteria to be developed to assess the three entities business performance in-place of the current profit plan. Evaluation of each of three businesses and their respective managers are given below: Spain: The financial reports suggest that the Spanish region posted a staggering EBIT of 149 thousand Euros in FY 2009. According to the case, the main reason associated with the negative outcome is the temperature being 1.7 degrees Celsius below the average temperature (Exhibit 6). Further, the bad performance of Spain...
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...called euro crisis of the Euro area, is a series of events that have affected negatively from the beginning of 2010 to the 16 European Union member states that make up the Eurozone, that have adopted a single currency and interweave a multinational monetary union within the EU. During this period the states of the Eurozone have been suffering a crisis of confidence without precedent, with speculative attacks on government bonds of various members, turbulent financial and stock markets and a falling exchange value of the single currency, in a context of uncertainty and difficulty to reach a collective agreement that still persists. In this paper, I will discuss some of the impacts that the crisis had over the Eurozone countries. In the last 6 months, the Euro had depreciated around 6 percent, making the exchange rate $1.38/€. This depreciation has caused an improvement in the European exports and a decrease in price for the imports in petroleum. The Euro/Dollar exchange rate touched a minimum on June 2010, when the rate is $1.19/€, and it touched a maximum on May 2011, when the rate was $1.48/€. According to an article from the Financial Times, “the first beneficiaries of a weaker euro are the countries of southern Europe whose difficulties have been putting the future of monetary union in doubt. Greece has been the focus, but Spain, Portugal and Italy also face a sharp loss of competitiveness”. Greece is the country that will benefit more from the depreciation of the Euro, because...
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