Prediction of PIIGS Seriousness - Research Paper Example

Prediction of PIIGS Seriousness: Effects on World Economy Glaring challenges facing the European countries termed as PIIGS are economically potent than many other major challenges facing the modern European states such as energy and climate change. In the recent economic crunch, many countries struggled to fight off uncontrollable public debt which threatened their very sustenance in the foreseeable future. In fact, some of them were in dire need of bail-outs as an intervention to the teething realities that their fortunes of economic performance presented. Low competitiveness for the countries acted as a major hindrance to economic augmentation while current account deficits proved to be uncontrollably high for them (Holger, 42). With these and several other multiplier challenges, the fate of the performance of these countries seems to be hanging on the balance. The following discourse attempts to expound on the global issues with regard to prospects of economic performance from the PIIGS countries. By virtue of being member states of the European Union that is economically unified by the Euro, PPIGS countries present a challenge not only to the eurozone but to the entire world. One of the factors making these countries to possess a critical role in world economics is therefore pegged to the fact that the Euro has grown to be an occupant of the top world currencies. According to Bercsten (7), Europe representation in world economy is directly proportional to the performance of the Euro in domestic economies which will in turn be extrapolated to a global impact. The author reckons that the position held by Europe with regard to world economic stage is very significant such that the developments in PIIGS ought to be a concern for any other economy remotely located out of Europe. According to Roubini (34), financial crises in the recent world economic occurrences can be predicted from the build up of economic vulnerabilities that the global economy was exposed to. In realization of the role played by political fortunes of a country to its prospects of economic survival, the author states that the political class ought to handle financial policies as if they did that to the entire world. The author reckons that the political interventions undertaken to cool down the PIIGS economic turmoil might not offer the appropriate solution to the entire world economy. By likening the economic crisis in PIIGS to a disease, Roubini (34) predicts that the intervention might prove to be a dangerous precedent set for the global economy by stating that the drug prescribed is toxic and will cause complications or turn out deadly in the end. This is due to the observation that the crisis interventions first rushed to rescue private firms, then their rescuers who are mainly governments and a question is if the government rescuers in the world economy will escape in the cascade. Apparently, the world economy is at stake if the trend continues. Issam and Robin (334) translate the financial crisis that particularly adversely affected the PIIGS countries as a consequence of more collective ignorant practices of the global economic systems. Despite the religious and idealistic approach, as the authors agree, it is evident that the PIIGS economic deterioration must be given an extensive and wide exploration that imminently implicates the entire global economic system. Stability of the world economy system determines how specific economies respond and react to financial hiccups such the one experienced in Europe by the PIIGS. This implies that the weaknesses punched in the PIIGS is a representation of how vulnerable the entire world economic system is to flux and risks and the need to change fundamental economic policies becomes a reality that none can escape from. A different perspective of the happenings in the PIIGS and the translation with respect to global economy has been sought by (Hillinger, 60) to the effect that the USA position in world economy and its dollar are a serious threat to the world economy. The author reckons that the fate of developing countries lies in the hands of the governments, which in turn rely on the conditional aid supplies to them by the IMF and the USA. The fact that the USA debt exists in its dollar whose supply can be controlled at printing makes it hard for other countries as well as the IMF to regulate the US dollar hence the world debts. As long as reforms remain needed in the US economic system and perhaps those of the rest of the world, the fates of PIIGS and the world economy remain uncertain. Alternatively, extreme performance by individual firms in economic terms must be approached in a different manner from that adopted by the USA and the PIIGS, where they avoided bankruptcy by transforming them into debts, at the expense of global economy. According to Young (2), while the recent PIIGS economic crisis offers an analysis opportunity for the global economic performance, it is possible to identify both pessimism and optimism. The author uses the happenings in these countries to illustrate a pessimist perspective presented by the policy adopted there and largely in the global economic arena. Fiscal sustainability must be facilitated by expansionary policy which keeps in touch with the realities of economic performance in the rest of the world. The author predicts that without fiscal policy coordination and cooperation from the rest of the world, the PIIGS countries stood little chance of recovery and future success. The reality of such a finding is mainly due to the globalization the economic systems such as those achieved by the integration achieved by the European Union, the economic outfit under which these countries fall. The author prescribes self rescue policies that do not implicate the global economic systems using policies designed from an informed perspective. Similar sentiments are held by Holger (45) to the effect that the policy adopted across global economies will be affecting the global economic performance if the best market readjustments are not made within the appropriate time. To save the global determining Euro in the PIIGS, expenditure cuts and relevant labour market reforms need to be considered due to the impact it has on global economy. Works Cited Bercsten, C. Fred “The Euro? Will it still be Around Five Years from Now?” The International Economy, 24.2(2010):6-10 Hillinger, Claude “The Crisis and Beyond: Thinking Outside the Box.” Economics, 4.23(2010):1-61A Holger, Zemanek “Competitiveness within the Euro Area: The Problem that still needs to be solved.” Economic Affairs, 30.3(2010):42-47 Issam, Tresani & Robin, Matthews “The Financial Tower of Babel: Roots of Crisis.” International Journal of Islamic and Middle Eastern Finance and Management, 3.4(2010):334-350. Roubini, Nouriel, “Crisis Economics.” The International Economics, 24.2(2010):33-34 Young, Chung K. “From the CEO.” SERI Quarterly, 3.2(2010):2 Read More