Eurozone Crisis and me

psalbmb

was wondering could someone help me for my thesis. Its based around the recent developments within the Eurozone which have revealed problems with the common currency, the Euro. now a major problem as we all know is interest rates, which are unionised through the ECB due to the monetary policy. however i dont understand how to put pen to paper as regards talking about how interest rates have affected the eurozone , please help? thanks guys

also does anyone have any solutions to the euro? ive a few ideas myself but Im looking for a broader analysis of ideas and thoughts. thanks again

Justin1982

psalbmb wrote: »

was wondering could someone help me for my thesis. Its based around the recent developments within the Eurozone which have revealed problems with the common currency, the Euro. now a major problem as we all know is interest rates, which are unionised through the ECB due to the monetary policy. however i dont understand how to put pen to paper as regards talking about how interest rates have affected the eurozone , please help? thanks guys

also does anyone have any solutions to the euro? ive a few ideas myself but Im looking for a broader analysis of ideas and thoughts. thanks again

Why do you think the interest rates are a problem for EU?
Interest rates just reflect how ****/risky the different economies are in the EU in the eyes of the traders.
I dont think there is a problem with the common currency either. There is a problem with politicians and economists who set **** and unsustainable economic policy.

CrazyRuss

Funnily enough, this OP sounds exactly like a CA I'm doing at a college in Dublin at the moment. It's due in about 13 hours time.

Psalm, I'd reccomend you get reading, I've done around 15-20 hours of reading from various online resouces and to be honest it;s a nightmare.

Best of luck.

[Jackass]

Well, you have to look at ways to combat a shrinking economy.

Firstly, there's monetary control, you can decrease interest rates, which in turn will make it cheep for people to borrow money in order to produce output (such as small business) and it will remove the incentive for people to keep funds in savings accout and will instead spend it on cheap recession prices (as competition increases as firms go to the wall) or to invest it, which will increase I in the expenditure method of calculating output / GDP.

This is obviously out of the hands of Ireland, as we do not control our own currency, but as it stands, we are beneffiting from measures that suit us anyway i.e. low interest rates.

Another method would be to devalue your currency, as Iceland did to get out of their crisis, as it makes your goods extremely cheap on the international market, thus increasing exports massively and creating more output and thus jobs etc in your Economy.

Again, this is not something Ireland can avail of as we don't control our currency and is the main argument for leaving the Euro.

Then there are fiscal measures. Depending on how you look at it, differnet things could work - Although most Economicsts argue that Monetary measures react much faster in the Economy and thus are much better stabalisation mechanisms, as there is a big lag effect on fiscal policy so it sometimes only kicks in after your economy has automatically stabalised anyway.

Theory on fiscal policy is to increase expenditure, which will in turn create greater output, which will create jobs and thus increase tax revenues and cut social welfare bill and cut taxes to give incentive to work.

In theory this happens automatically as when the economy retracts people go onto the dole and claim benefits, so expenditure is increased automatically and tax receipts are cut.

Austerity, in theory, is retractionary measure being availed of during a time of massive retraction anyway, which is removing money from the economy at a time when it needs money pumped into the economy - i.e. expansionary measures.