Crisis Europea

ESSAY EUROPEAN ECONOMIC CRISES

Greece, Spain, Portugal, Ireland and Italy and to a lesser extent Belgium, Holland and Slovenia, all members of the Eurozone, are currently in recession, some with hints of depression.

The Great Recession of 2008-2009 meant fewer sales, production, employment, wages and profits, and in European countries collapsed Mediterranean tourism, a major source of foreign exchange and employment. Falling tax collections and increase fiscal spending to avoid a major recession, the deficit increased substantially. Public debt rose to new levels and some countries simply cannot pay.

In Ireland and Spain, the big problem is the rapid growth private debt mortgages to 2007 house prices rose Upon the Great Recession, many unpaid loans Were, Which halted construction and laid the local distressed banks, indebted to turn with German and French banks.

The adjustment problem is to induce a sharp fall in domestic demand. If world income is not recovered and will not increase external revenue flows to these countries, there is no way to recover their income level, for the fall in public demand is not offset by an increase in private demand. Thus, the setting and financial aid are insufficient to recover these economies.

Another possibility is to rapidly increase the productivity of Greek, Portuguese or Spanish to make them more competitive. Currently their productivity is much lower than that of the German and French, so that the common exchange rate in the Eurozone, determined by the flow of the largest exporters, German and French, does not support its costs.

The European crisis is very serious: by appealing only to the adjustment is an easy and next, particularly in the Mediterranean countries of the Eurozone. And affect the rest of the world, as Europe remains the world's largest economy.

...