Friday, April 26, 2019

The European sovereign debt crisis during 2010-2011 Essay

The European sovereign debt crisis during 2010-2011 - Essay ExampleHistorically, when a sovereign nations organizational debt exceeds the annual GDP of the country, the risk increases proportionately that the country will default on all or a portion of the debt requirements, particularly in the circumstances where the debt instruments are held by foreigners or in an opposite(prenominal) currency than the national coin. The ability of sovereign nations to generally print money without formal external keep is well established and the example of Zimbabwe is an extreme example of this, but the United States has as well as reached a debt aim that is over $15.5 trillion USD or near 100% of the annual GDP outlook, while the economy is also declining and recessionary,. The U.S. Federal Reserve may also print money to bailout banks in the U.S. and abroad, as it has done by-line the Lehman bankruptcy, but the Eurozone situation is more complex. Nations like Greece now have their debt valu ed in Euros rather than fluid dram and the sovereign is no longer able to print money, deflate the currency, and cover government debts in the bearing of the U.S. central bank. Instead, it appears as if Greece will either default or be bailed out by other Eurozone members, while Wall Street and stock markets around the world react daily to these events and news stories as they herald serious consequences for the international economy that is interconnected during the era of globalization. Political Dynamics of the Eurozone Economy The Eurozone is a policy-making experiment that involves a common currency (the Euro) and a number of sovereign nations that retain their political autonomy in budgetary and domestic affairs while moving together towards ever great unity in government on the supra-national level. This dichotomy has led to the nations of the Eurozone abandoning their national currencies, but still in operation(p) domestically with differing levels of economic productio n, taxation, social expenditures, and national debt levels. The U.K. and Switzerland remain outside of the Eurozone and under their own traditional currencies, the chock up and Swiss Franc. Germany, France, and other Northern European nations are generally seen as being economically stronger than the Confederate European countries, with the acronym PIGS being used for the countries Portugal, Italy, Greece, and Spain with the worst economic outlook, budgetary problems, and largest national debt requirements in comparison to GDP. Ireland has been considered a part of this group by some (PIIGS), as the country experienced generally the same problems in an overheated banking, real estate, and finance sector which formed a bubble and popped, leaving the taxpayers and national government responsible for the bailout. Yet, while Ireland and Iceland have already crashed previously before the 2008-2009 meltdown in their national economies out-of-pocket to the problems in financial regulati on and overextension of risk taking via leverage in investment banking, the

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