Tag Archives: eurozone crisis

Inequalities might lead to an end of the Eurozone


The fall of the Berlin Wall in 1989 showed that the time for much closer, stronger European bonds had grown near. Hopes for a peaceful and prosperous future were higher than ever, among both leaders and citizens. This led to the signing of the Maastricht treaty, which formally established the European Union in 1993 and created much of its economic structure and institutions – including setting in motion the process of adopting a common currency, the euro.

The eurozone structure

The basic idea behind the structure of the Euro was that self-regulating markets would ensure prosperity across the Eurozone as long as:

  • Inflation was kept in check by the European Central Bank
  • Member States had fiscal discipline, keeping their public deficits and public debt low

For these purposes, the European Central Bank was given a sole mandate to hit a 2% inflation target – regardless of patterns of unemployment and economic activity across the Eurozone. Unlike other Central Banks such as the US Federal Reserve, its mandate does not include ensuring price stability and guaranteeing full employment. Only the former is within the realm of its mandate.

Similarly, the Stability and Growth Pact required member states to ensure that their public deficit was kept below 3% of their national income (GDP) and their public debt did not exceed 60% of GDP.

The crisis

Since the 2008 crisis, the Organization for Economic Cooperation and Development (OECD), the European Commission, the National Institute of Statistics and Economic Studies, along with other statistics institutions within the European Trade Union Confederation, have all agreed on this fact: In recent decades, social inequalities have increased significantly across Europe. And not only in Greece or Spain: the situation is the same in Sweden and Germany. In the past twenty-five years Swedish society has experienced a considerable growth in inequality; according to the OECD, between 1985 and 2008 the country recorded the highest growth of income poverty among industrialized countries.

After its implementation, the euro fairly quickly became the second most important currency in the world, but as of 2015, it has failed to supplant the U.S. dollar at the top of the world’s monetary heap.  Continue reading Inequalities might lead to an end of the Eurozone

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How Europe failed Greece and what its European “partners” never learnt from recent European history


 

Greece’s financial nightmare has lasted five years now. There’s no sign of real relief—for a very specific reason.

While reading different Online Magazines regarding Greece one could come across a United States magazine called Salon (23/6/2015) which has a recent article entitled ” Europe wants Greece to suffer ” , and explains:

What has been happening in Greece has been a long exercise in sadism by European elites, who care only about keeping their political project alive, regardless of how those who must deal with the consequences are affected. Three governments ago, Greece rang up a series of debts that they have no practical ability to pay back. The structure of the eurozone, 19 countries sharing a common currency, encouraged this debt buildup, which manifested through capital flows from the wealthier north to the southern periphery. With a single currency, investors chased higher returns in countries where capital was scarcer; this was part of the core euro design. When the investors pulled out and the debts came due, the northern states, led by Germany, pretended this didn’t happen and demanded their money back.

Continue reading How Europe failed Greece and what its European “partners” never learnt from recent European history