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CAN THE EUROZONE SURVIVE - Coursework Example

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“WILL THE EUROZONE SURVIVE?” Purpose of the paper This paper delves in to the issues facing the Euro. It addresses the past, current and future situation of the Euro. It compares the Euro with other currencies and looks into the contribution of the Euro to the current crisis that faces the countries in the Eurozone…
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CAN THE EUROZONE SURVIVE
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CAN THE EUROZONE SURVIVE

Download file to see previous pages... Finally, it stipulates reasons on to whether the Eurozone can survive the crisis and whether it should survive the crisis. Introduction The Eurozone is a constituent of the European Union countries that have adopted the euro as their common currency. The Eurozone is a constituent of many countries including: Austria, Finland, France, Belgium, Cyprus, Germany, Slovakia, Netherlands, Estonia, Greece, Italy, Luxembourg, Ireland, Malta, Portugal, Slovenia and Spain. The Eurozone crisis is a state whereby the countries in the Eurozone have experienced difficulties in paying their debts. The Eurozone countries are experiencing the crisis since they have experienced deficits in their current accounts. That means the capital outflows have exceeded the capital inflows. These countries are located in the continent of Europe. These countries had faced many problems in their countries and wondered how to eliminate. The Euro was adopted first by eleven states in the 1st of January 1999. This happened after the countries decided to use a single currency across the union. The Euro was developed by the European states to be used as a common currency. Some of the complexities that these nations faced before the adoption of the euro include the devaluation of their currencies. This is a situation whereby a countries currency loses value in terms of another currency. This threatened the stability of the countries and they therefore saw it necessary to look for solutions to those problems with the interest of protecting the states from any instability. Furthermore, shift of the exchange rates of the countries was a threat and the countries sought for some Exchange Rate Mechanism (ERM) so as to solve the issue (Ralph, mar 9 2012). The nations experienced inflations at a high rate with the shifting of the exchange rate. They, thus, decided on the Exchange Rate Mechanism so as to solve the issues of inflation and bankruptcy that come with inflexible exchange rates. The countries agreed to the need of a common currency but with various purposes of protecting political and economic interest, in mind. Before entering into the contract of using one currency, the states had experienced many difficulties including the devaluation of the countries’ currencies against other countries’. There were qualifications to be met and the Euro was adopted by those states only after the achievement of the qualifications. Some of the qualifications were for the member countries to have their fiscal deficits under 3% of the country’s Gross Domestic Product (GDP) and for the states’ governments to lower and limit their debts to 60% of the GDP (Peter, & Matt, Mar 15 2012). However, after the adoption of the common currency, it is sad to state that the countries that hoped to get away from the financial crisis are now caught up in it. The countries are caught up in it because they failed to follow some laid down rules and decided to act on what they deemed fitting to them. There are many strategies underway that the countries are trying to implement to see if they’ll get out of the crisis. Analysis of the problem (Past) The European Union was formed with the signing of the Maastricht Treaty by the member states, in the year 1992. The need and means of the formation of the common currency was formulated in the year 1992. It was in 1999 that the ...Download file to see next pagesRead More
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