The Economic Crisis of the European Union
Abstract: Since 2009 Europe has been experiencing some major economic issues and European government banks were bailed out in order to not have to leave the Euro. Very little progress has occurred since the onset of the crisis until recently and still many countries are suffering from detrimental debt and very low quality of life. Discovering the foreground for this economic crisis is imperative to be able to calculate a solution and unfortunately, this has still yet to be done. The economy of Europe can’t be revived with the existing policies and institutional makeup in place. The problem within the European Union falls within its institutional architecture and policies. The social, political, and economic integration goals of the EU have not been successful due to lags in the institutions leading to weak policies. This has lead to member states living as individual entities, creating unnecessary competition within the EU and causing large gaps between successful and unsuccessful countries. Through various viable online databases and current event newspapers and journals, it clear that the EU needs an extensive makeover. These sources lend insight to the ideology that the policies in place are not effective and are a direct effect of asymmetric institutions. This paper will prove that in order to step out of this financial crisis and prevent events from repeating themselves, the EU needs to remodel its institutions and put forth new policy reforms.
The crisis that invaded the European Union in 2009 is largely imparted due to member states circumventing economic policies to avoid large deficits. Unfortunately, this caused a domino effect amongst the member states, which ultimately lead to decreased confidence in the Euro and in turn, limited foreign investments affecting the liquidity of the market. Over the past five years, the European Union has been struggling to make sufficient policy changes to aid their member states out of economic deficits. This year has been the first year that many countries have seen any economic improvement since the crisis first hit. Europe has continuously been in a state of persistent unemployment, inequality, limited growth, and a pervasive sense of powerlessness. The difference in economic growth models between the north and the south, the overbearing institutional asymmetry of the member states, the horrific austerity measures that were imposed by the European Central Bank at the onset of the crisis, and the growing sense of nationalism within the EU member states are all examples of extreme lapses in EU policies. The above has inhibited the EU from moving forward out of this economic downfall and has left some economies in a more detrimental state. The European Union will continue to remain in economic limbo if they don’t implement plans for major policy reforms.
For more than a decade, European governments have been stimulating economic growth within their national borders by inexpensively borrowing money and running large economic deficits. An economic deficit can be defined as the increase in the amount of expenditures of a nation over their revenues, resulting in a negative balance sheet. During the 2000’s, member states turned to securitizing future government revenues to reduce their debt and deficits in order to continue to fall within the confines of deficit spending and debt levels put forth by the 1992 Maastricht Treaty. Creative accounting spurred in the sovereign states as many began to sell rights to receive future cash flows which in turn allowed governments to raise funds without violating debt and deficit targets – thus, enabling countries to sidestep EU policies. Debt levels were being masked through inconsistent accounting, off balance sheet transactions, and the use of complex currency and credit derivatives structures. In December 2009, Greece’s budget deficit was two times greater than previously reported and rumors...
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