European Business Hnd

Topics: European Union, Euro, European Central Bank Pages: 2 (513 words) Published: April 9, 2013
Assignment 2

Eurozone Analysis

French finance minister: Pierre Moscovici

Looking at the current situation within the EU and what effect the recession has had on its accompanying delegate countries it is quite clear to see that many are feeling the financial strain being administered as a result of the debt built up through improper leading to the subprime market and now those debts are having to be written off by the banks leaving millions of tax payers out of pocket and the government having to bail out the banks to ensure the country is still able to function/trade without descending in to chaos and anarchy.

‘PIIGS’ is the acronym used to describe the countries which are currently in financial turmoil as a result of the banking crisis which has spread throughout the world since 2008. The countries in question are Portugal, Ireland, Italy, Greece & Spain all of whom have requested financial aid from the European central bank.

In order for the countries to pay back the loans from the European central bank they will need to implement austerity measures in the form of raising taxes and reducing costs on public spending, the effect of that will be job losses within the public sector.

This is turn has devalued the strength of the single Eurozone currency (Euro,€) to the point where the UK currency is stronger but as a result businesses can not afford to reside within the UK due to high tax costs, labour costs, and costs of materials and as a by product businesses are closing in the UK leading to unemployment and loss of tax revenue for the government.

Exports to other EU countries account for 51 per cent of the UK’s exports of goods and services, so if the UK decided to leave the EU they would be required to pay all trade taxes making it unviable for other smaller EU countries to trade with the UK.

Possible solution would be for the UK to embrace the single currency of the euro and enter the as a fully emerged delegate which in turn will...
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