Will the Euro Survive Case Study

Topics: European Union, Euro, Spain Pages: 1 (322 words) Published: February 26, 2014
Will the Euro Survive?
1. Why are Greece, Ireland, Italy, Portugal, and Spain sometimes referred to as the euro zone’s “peripheral countries”? Greece, Ireland, Italy, Portugal, and Spain are the poorest in European Union. They are poor because of the unefficient and unsupporting system of the country to join the EU one-currency and trading system. Greece, Ireland, Italy, Portugal, and Spain are exploited by the centre EU countries. Their contribution in developing and maintaining the welfare of EU countries is too small compares to the contributions of other EU countries.

2. Why did the European Commission bail out banks in Ireland and Greece? Why not let them default? The European Commission bailed out banks in Ireland and Greece for some reasons. First, it was done to keep EU existing and to keep Euro as hard currency. If banks in Ireland and Greece couldn’t pay their debts, a domino-effect would happen to banks in another countries. That would lead to worse condition of EU economy.

3. Investors demand that Portugal’s Jose Socrates and other leaders make big spending cuts. However, Socrates and other socialist prime ministers would prefer to generate economic growth via government spending. Does this make Socrates, Zapatero, and like-minded leaders Keynesians? Or are they following Hayek’s principles? Policies that are taken by Socrates and Zapatero tend to follow Keynesians point of view, which mainly states that optimal economic performance could be achieved–and economic slumps prevented–by influencing aggregate demand through activist stabilization and economic intervention policies by the government.

4. Why do citizens in France, Great Britain, and elsewhere stage protests when the government imposes austerity measures? We think that the protests show a growing concern towards cuts in public spending despite of rising unemployment. The governments can already see that austerity policies in Europe will lead to recession, so they will need to...
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