The European Economic and Monetary Union (EMU) is an agreement between participating European nations to share a single currency, the euro, and a single economic policy with set conditions of fiscal responsibility. Since the euro entered in circulation in 2002, the European Union has become more and more powerful. However, in 2008 when the economic crisis dramatically started with a huge bank investment from the bank in the United states of America “Lehman Brothers », “Lehman Brothers Holdings Inc was a global financial services firm.
Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA, doing business in investment banking, equity and fixed-income sales and trading (especially U. S. Treasury securities), market research, investment management, private equity, and private banking. On September 15, 2008, the firm filed for Chapter 11 bankruptcy protection following the massive exodus of most of its clients, drastic losses in its stock, and devaluation of its assets by credit rating agencies.
The filing marked the largest bankruptcy in U. S. history, and is thought to have played a major role in the unfolding of the late-2000s global financial crisis. ” http://en. wikipedia. org/wiki/Lehman_Brothers. Unfortunately the European Union had to face complex conflict. In this essay, we will pinpoint the benefits and the challenges of the EMU in the light of the current economic crisis. “The financial crisis that hit the global economy since the summer of 2007 is without precedent in post-war economic history.
At present, governments and central banks are well aware of the need to avoid the policy mistakes that were common at the time, both in the EU and elsewhere. Large-scale bank runs have been avoided, monetary policy has been eased aggressively, and governments have released substantial fiscal stimulus. Large-scale bank runs have been avoided, monetary policy has been eased aggressively, and governments have released substantial fiscal stimulus. This perception dramatically changed when a major US investment bank (Lehman Brothers) defaulted in September 2008.
But first steps have also been taken to redesign financial regulation and supervision – both in Europe and elsewhere – with a view to crisis prevention. Aware of the risk of financial and economic meltdown central banks and governments in the European Union embarked on massive and coordinated policy action. ” http://ec. europa. eu/economy_finance/publications/publication15887_en. pdf. In the Greek economy, the crisis manifested with a slight delay compared to the rest of the Eurozone.
The country has come in a recession phase in 2009, whereas in 2008, the expansion of the GDP had slowed. The more significant element, whether to believe the bourgeois statistics, it is the industrial sector, entered in a recession phase in 2005, had dropped of 4% in 2007-2008. In 2008, all of the manufacturing industrial frameworks were in recession, except the food industry (1, 2% of improvement). The crisis of the manufacturing sector is reflected in the important decrease of industrial products (about 7 %). The construction’ sector underwent an important decline (-9, 4%).
From 2002 to 2008, the trend was lower from the production of agricultural product made out of soft wheat, corn and peaches. According to data given by Eurostat, the agricultural income has increased of 7, 1% in 2008, because of a slackness of the sales prices of producers and of a very important growth of industrial products prices. An accordance with Eurostat, The income of the agricultural outright as correlation of the added net value compared to the costs that have been dropped 2008 of 80,1%, compare to 2000 (=100). In 2008, there has been an important fall of prices in the Athens Stock exchange.
Its total market value was estimated, end of 2008, at about a third of its value end of 2007. An important part of this fall is due to a massive withdrawal of foreign investors in October 2008. Independently of the crisis cycle’s phase, a characteristic of the Greek economy is its defective fiscal situation and that is getting worst long-term. The slowing of the GDP growth which has increased over the second semester of 2008- has greatly hardened the conditions of State‘s borrowing. The latest estimates provide a decline of the GDP of 1% in 2009.
The recessions extend in the Greek economy will certainly depend of the course of the crisis: In the Balkans, where important investments have been realized by societies located in Greece. This concerns economies of high capitalists’ rates growth, like Romania, with a growth of 7, 7% in 2008 and a recession of 1, 8% planned for 2009, or Bulgaria, with a growth of 4, 4% and a decline of 1% planned for 2009. In the international market, whose an important part is a 1; of entries. In important European countries, such as Germany and Great Britain.
To those countries belong to an important part of tourists who visit Greece, not only in absolute figures, but also in nights and in personal spending. The important effects of the entry of the European Union compared to the sharp decline of the industry and of agriculture are contradictory. The mentioned facts below prove that the effect of the crisis on the Greek economy is going to be deep. Some predictions see it lasts two years. It is going to exacerbate the social contradictory existing through the rise in unemployment, part-time employments and via the extension of flexible work relationships.
According to the bourgeois calculations, poverty a already increased, with a particular focus in children ( about a quarter) less than fifteen years old, as well in the young adults from 18 years old to 24 years old. Of course, these index of poverty only reflect a part of these contradictories, they do no reflect the fact that the salaries and the treatments are far from tied in the indicial growth of the GDP and to the productivity growth in an enlargement reproduction phase in Greece.
A large economic power with a large unique market like the European Union must coordinate the economic politics of its members States. This efforts of coordination allows it to react quickly and of one single voice face to those difficult situations, like the economic and financial current crisis. Seventeen countries have pushed logic a little bit farther by adopting the euro as a single money. The cooperation in economic politic perform to the title of the Economic and Monetary Union, which participate all of the member countries of the European Union.
It is in this context that are adopted the common orientations on important economic questions. The cooperation promotes the growth and the employment and guarantee the best social protection pour everyone. It allows to the European Union to oppose a consistent answer in the case of a difficult financial and economic situation. Finally, it allows it to absorb shocks coming from the exterior and to resolve more efficiently the financial and economic problems. Thanks to the European Union, the money transfer to the children abroad is cheaper.
The European Union brings a coordinate answer to the economic and financial crisis which exploded in October 2008. The national governments, The European central bank and the commission have worked together to protect the savings, continuing the affordable credit flows for the firms and the households, and to establish a system of financial governance global. It is not only about restoring stability, but to create favorable conditions to the economic recovery and to creation of employments. The member states of the European Union have unlocked more than two thousand of Euros for these measures of recue.
The politic responsible have coordinate the interventions to support the banks and to guarantee the loans. The European Union has as well statement of fifty thousand the minimum of guarantee of bank deposits of individuals. The advantages of the Euro are the fact that most of the countries of the European Union who have the same money made it easier to handle the crisis. The Euro allowed the Union to react to the global collapse of the credit and to gain a stability that the European Union could have never conserved differently.
The Euro is used daily by more than 60% of the European citizens. It present many advantages for everyone, the tourists and the businessmen travelling in the Euro zone do not have to pay exchange fees, costs related to cross-border payments were deleted or strongly reduced; the consumers and the firms can easier compare the prices, which has for effect to stimulate the competition. The euro zone contributes to the prices stability. The European Central Bank fixes the director rates of a way to maintain the inflation at a medium term less than 2%.
It manages the foreign exchange reserves of the European Union and can interpose of the exchange markets to influence the exchange rates of the Euro. All of the country of the European Union are intended to adopt the same unique money, for all that their economy are prepared. Thus that the countries that are joined the European Union in 2004 and 2007 join gradually the Euro zone. Denmark, the United Kingdom reached political agreements and do not use the Euro. For a country to join the Euro zone, it must present a stable exchange rate for two year.
Among these criteria are interest rates, budget deficit, inflation rate and the amount the public debts. The European central bank and the European commission work together to create a unique space of payments in Euros, to enlarge the circle of advantages related to payments more efficient and cheaper. Eventually, all the national and cross-border payments made in Euros will be treated the same way, either it is done by transfer, or debit or by credit card. The European Union is expanding its payments advantages by debit. Despite this enormous crisis that the European Union sustained, the Union succeeded in making all the country survive.
Unfortunately, Greece is having many troubles fixing its economy, since the past few year, its economy have been getting worst and worst, The European Union hope that the Greece will get better without contributing in giving all the European Union’s money to the country, otherwise: it will be the whole European Union that will be in wide financial deficit. Will Greece improve its economy in its own ? REFERENCES: http://www. businessdictionary. com/definition/economic-crisis. html http://ec. europa. eu/economy_finance/publications/publication15887_en. pdf http://en. wikipedia. org/wiki/Lehman_Brothers.