Europe and the Eurozone crisis Flashcards
(23 cards)
What kind of problems did Ireland and Spain have right after the shock?
They had banking problems
What issues did Italy, Portugal and Greece face?
fiscal issues
What were further problems of the Eurozone in terms of politics?
Institutional and political aspects make it very difficult to respond to the crisis. Furthermore the fiscal federalism is too weak. There was also a very slow price adjustment due to a common currency.
When was the first period of the Eurozone crisis?
December 2009 to July 2011
What happened in the first phase of the Eurozone crisis?
The emphasis is on weakness and bailout for smaller countries that are on the periphery of the eurozone. Specifically, Greece, Ireland, and Portugal.
When was the second phase of the Eurozone crisis?
July 2011 to July 2012
What happened in this second phase of the crisis
the crisis spreads to the larger countries of Spain and Italy
When was the third phase of the crisis?
July 2012 to today
What happened in the third phase?
Anti austerity government gain power and grexit gets close
What did Greece do in December 2009?
it announced a 300 billion debt. 113% of GDP EU limit was 60%
What is historically known about countries such as Greece with such a high level of debt?
That they cannot pay that debt back.
Which country has a very high level of debt?
Japan sometimes has more than 200% of GDP without anyone getting upset.
What was the main problem in Portugal?
Fiscal problems and slow growth
Who is the “Troika” ?
The European Commission (EC), the Internatinoal Monetary Fund and the European Central bank
How high were the bailouts?
Greece: 110 million
Ireland: 85 million
Portugal 78 million
Did the bailout of 2011 work out for Greece?
No, it did not
How do Italy and Spain respond to the debt crisis?
With austerity programmes
What happened by early 2012
the situation is more stable but a recession has set in. Levels of unemployment are dangerously high
What did Draghi say in 2012?
He says that they will do whatever it takes to preserve the EURO. This speech worked and the marked calmed
What happened in the third phase
Anti austerity parties come to power (the Syriza Party of Zypras
Why have the effects been so much worse of the financial crisis in EUROPE?
not an optimal currency area. Nobody thinks we should have one currency in the world. It is useful
Why is it useful to have more than one current?
because if you have a shock you can have monetary policy to react to that shock
What si the disadvantage of having your own currency?
It creates additional transactions costs
