This website uses cookies to ensure you have the best experience. Learn more

Greece Out Of Euro Essay

1072 words - 5 pages

Topic: Can the issue of Eurobonds be a solution to the current debt crisis? Word count: 697

Eurobonds is definitely the solution for Euro-crisis?!
By Jean-Timothy Leonora in Netherlands Published: September 30 2011 08:00

This euro-crisis is driving everyone crazy: residents, investors, companies, countries and so forth. Everything started with the credit crunch that hit the VS in 2007; first victims were the house markets, followed by financial institutions, than the whole banking system had liquidity problems which led to disturbance in the international financial system and nowadays we are dealing with the Euro-crisis. Greece is now facing probability to go bankrupt. What should we ...view middle of the document...

Public debt GDP Growth (Billions (Billions rate Inflation Unemployment €) €) (%) rate (%) rate (%) 160.5 172.7 1.3 1.4 11.0 1843.0 1548.8 1.3 1.6 8.4 148.1 328.6 638.8 3118.9 7858.4 156.0 230.2 1062.6 3170.3 10216.8 2010 -0.4 -4.5 -0.1 -1.6 4.7 2.0 Longterm interest rate (%) 10.9 5.3 9.6 13.7 15.9 12.6 20.1 5.3

Table 1 Portugal Italy Ireland Greece Spain PIIGS EU-17

Sources: ECB, European Commission and Eurostat

In both cases Eurobonds can be of help (see chart 1). Eurobonds will drive the long-term interest rate of all EU-17 countries to an average of 4.4%1. Downside of issuing Eurobonds is that the big economies like Germany and France will have a higher interest rate to bear in the early phase of the

1

Eurobonds are currently trading at an interest rate of 4.9-5%. The calculation is in the Appendix: table 2.

implementation, but are we looking at a small or bigger picture? If we want to save the EU, we need to look at a bigger picture. Even if the interest rate increases for these big economies, the ECB could intervene and drive the interest rate down by buying some of the Eurobonds. Issuing Eurobonds will save Greece and of course also the other countries that are here at stake.

If we don’t choose now for Eurobonds, Greece will default. Default will in turn create more uncertainty, because peoples are afraid about the contagion spread, in an extreme case this uncertainty can lead to bank runs. What’s next?, Italy; how are we going to save Italy? Italy’s interest rate is already increasing and that’s costing them to cut their government spending, lowering benefits and public services provided. The total welfare is here at stake. If we go for the Eurobonds, this could drive the interest...

Other Essays Like Greece Out of Euro

European Economic History Essay

639 words - 3 pages bailing out is paid by Germany. Germany pays a lot to keep the survival of euros because it has the ability and willingness to do this. However, if Germany does not have the ability to afford the bailing out in the future or the country changes its mind, or if the economic burden becomes too great, the survival of euro would be extremely difficult. So, it does not mean that the crisis has been contained.

Financial Crisis in Greece Essay

868 words - 4 pages FINANCIAL CRISIS IN GREECE Enter the economy of euro zone member, Greece. Once considered as a financially stable country, Greece is now on the edge of having a financial default. With a debt total amounting to an estimated $420 billion, experts say that this debt would have been bigger that the country’s economy itself and this debt is predicted to increase as time goes by because Greece spends 12% more than it gets revenues. So what’s

Imf Rescue Programs in the Financial Crisis in Eurozone

645 words - 3 pages IMF RESCUE PROGRAMS IN THE FINANCIAL CRISIS IN EUROZONE Mutegi Cliff United States International University IMF RESCUE PROGRAMS IN THE FINANCIAL CRISIS IN EUROZONE Introduction of Eurozone Crisis The Eurozone crisis began when it became evident that Greece was unable to repay its debts. This realization posed a threat not only to the 17 nations using the Euro currency but the whole European Union – 27

The European Soveirgn Debt Crisis

3712 words - 15 pages major political impact on the ruling governments in 8 out of 17 euro zone countries, leading to power shifts in Greece, Ireland, Italy, Portugal, Spain, Slovenia, Slovakia, and the Netherlands (Wikimedia). Causes of the crisis varied by country. In several countries, private debts arising from a property bubble were transferred to sovereign debt as a result of banking system bailouts and government responses to the slowing economies post-bubble

Europe Might Bankrupt

595 words - 3 pages Europe lacks will to resolve crisis, says Obama From the Newspaper | International | By Laura MacInnis 17th November, 2011 CANBERRA: US President Barack Obama said on Wednesday he was deeply concerned about the continued euro zone crisis, blaming it on a lack of political will, and that market turmoil would continue until Europe has a concrete plan to deal with its debt woes. Obama praised French President Nicolas Sarkozy and German

The Absence of a Common Fiscal Policy in Europe

682 words - 3 pages debt and budget surplus according to their economic capacity and structure and according to their taxation system which is also meeting their national requirements. Now let’s see this situation of imbalance between the EU members through an example: Greece, as Jelena illustrate you before has exceeded the Eu ceiling every year since the country adopted Euro, registering the highest percentage of budget deficit and public debt due to internal

European Union

834 words - 4 pages join the European Union (EU). Europe’s single currency the euro is officially launched in 1999 and 11 EU Member States adopt it as their official currency, forming what is known as the euro zone. Greece joins the euro zone in 2001. The Treaty of Nice is signed, introducing reforms to the EU’s institutions to prepare for the expansion of the Union with the admission of ten new Member States in 2004. In 2002, the euro becomes a reality on 1 January

The Euro: Currency Change in Europe

1159 words - 5 pages and that made it difficult to pass out the monetary policy strategy to the market and the public, and that was a real challenge for ECB. By now, the understanding of ECB’s monetary strategy has greatly improved. “The ECB today ranks as one of the most open, transparent and predictable central banks in the world, and they continually seek to improve their communication� (ECB, 2004) During the first five years of the existence of the Euro

Euro Crisis

2961 words - 12 pages foreign reserve of $3.2 trillion may come into picture as its trade exports cover very large part of EU. And if the euro depreciates then it would affect the profit margins of China. China with its enormous foreign reserve can help Greece to pay its debt obligation and can get long term returns at high interest. Is it time for Greece to drop out of the euro? One of the most advised opinions for Germany is to opt out of EU and restart with its older

World Trade

1664 words - 7 pages that the Polish foreign minister does not speak with his colleagues from Lithuania even at multilateral meetings” (Lithuania Tribune,2010). With Germany being the only country to adopt the euro thus further complicating trade between them. With all four countries sharing access to the Baltic Sea, and Lithuania operating one of the premiere ice free ports in the region, these countries can only increase their markets and economies by working out

Ancient Greece

1784 words - 8 pages which caused them all to unite against a common enemy. This formed many alliances and some of the fought between each other. However, the large scale of warfare that resulted out of alliance forming and Persian threat developed the tactics, weapons, and general approach to war in ancient Greece. Eventually, a person named Phillip was able to bring all of Greece under his own rule and at that point strengthen the warfare training, tactics, and

Related Papers

Euro Crisis Essay

967 words - 4 pages Greece , Portugal etc are facing recessionary conditions i.e. negative economic growth. Thus the whole Euro zone is witnessing differential growth rates causing strain. In a worst case scenario, this severe strain would cause Euro in its current form to eventually break down. However there are high costs of this breakdown as it will have some serious economic ramifications globally and especially for the countries in the Euro zone. Many analysts

The Future Of The Eurozone Essay

755 words - 4 pages financial markets of the members in the Euro zone. The euro crisis pointed out major flaws in the European Union’s Economic Monitory Union policies (Dăianu, D'Adda, Basevi, & Kumar, 2014). The turbulence came to an end in 2013 making the region fairly stable and calm seems to have resumed in 2014. In 2013, Greece got an excess budget, lowered the interest rates of their bond, and got a positive gross domestic product (Dăianu, D'Adda, Basevi

The Euro Essay

759 words - 4 pages currencies were set and the member countries began implementing a common monetary policy. The euro was introduced as the legal currency and the local currencies of the participating states became subdivisions of the euro. At this time it was only an electronic currency. Finally, by January of 2002 new banknotes and coins went into circulation along with phasing out the old currencies.This is the largest monetary changeover the world has ever seen and

The Euro Currency Essay

1403 words - 6 pages " on 4 August 1995. Due to differences in national conventions for rounding and significant digits, all conversion between the national currencies had to be carried out using the process of triangulation via the euro. The rates were determined by the Council of the European Union, based on a recommendation from the European Commission based on the market rates on 31 December 1998. They were set so that one ECU would equal one euro. The European