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1. What Role Should the European Central Bank Play in the Current European Financial or Public Debt Crisis - Essay Example

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The European Union’s central bank is the organization that should be responsible for the administration of the monetary policies of the seventeen member countries in the Euro zone. 1 Its main responsibility should be the maintenance of price stability within the member states…
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1. What Role Should the European Central Bank Play in the Current European Financial or Public Debt Crisis
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"1. What Role Should the European Central Bank Play in the Current European Financial or Public Debt Crisis"

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The present European economic crisis has built up as a result of the countries within the continent struggling to pay up the debts they have been building up in the past few decades. Several countries within the union have failed to record an economic growth in turn failing to pay the bondholders their required guarantees. These countries include Spain, Italy, Portugal, Greece and Ireland. 4The crisis was exposed by the American recession of the year 2007-2008 that made many countries in Europe experience slow financial growths due to the unsustainable fiscal policies that most European countries were utilizing.5 The countries that had not made financial reforms such as Greece were the first to feel the pain of the crisis when they experienced very high deficits in their budgets which were also unsustainable. 6 Investors who had interests within the countries that were experiencing financial difficulties in turn demanded superior yields on their bonds raising the costs of these countries debts.7
The union’s central bank should resist the idea of printing more money so that they can buy out the union’s distressed debts.8 In the month of December 2011, the central bank availed credit facilities to the troubled financial institutions that were within the region. This move that the central bank has been putting much effort in has not helped in solving the continents problems, however, it helped in boosting the confidence of potential investors who now perceive the economies that were largely in debt as experiencing slow growths in their activities. This move has additionally helped in preventing the collapse of the economies of some member countries along with keeping the European currency stable in the global monetary markets.9
The union’s central bank should establish legal instruments such as the European monetary stability facility with the cooperation of the ...Download file to see next pagesRead More
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