Surviving the euro crisis

 

Aside from the falling dollar, the global economy today is also struggling with the Euro crisis. To prevent a second financial crisis, definite and strict measures must be taken to stabilize not only Europe but the worlwide economy as a whole.

Germany is trying to solve this dilemma by regulating the markets and pacifying the speculators, but this move seems to be seen as inconsistent and even merely a diversionary tactic to prevent people from knowing the real issue, that is, the massive burden they will be facing in the future. The government spent billions and billions of euros on certain “rescue packages,” sending it into spiraling debt. Who pays for it? The citizens who will be burdened with unending, senseless taxes.

Banks should hold more equity capital.  One other possibility is a strict separation of the traditional banking business from speculative transactions. Most importantly, countries in the Euro-zone must bring back the confidence of the financial markets. They can only do this by cleaning up their budgets. This means that they have to lessen their deficits significantly in order for large investors like banks, insurance companies and pension funds to start buying European treasury bonds again.

Another possible solution is to cut public sector wages and the Greek civil service. This is a clear and strong sign of facing the budget deficit problem, but has a negative impact on output and spending. Cutting the wages and a rise in unemployment will definitely worsen the recession. It is difficult to predict and expect job openings in the private sector.

Both Greece and Spain lack competitiveness with regard to their large budget deficit. There are many many ways to bring this back up, but it takes a lot of time, effort and most importantly, strong political will, to make anything work at all in a government.

So far, the Irish economy has been “successful” in overcoming the budget deficit dilemma. Other economies can learn from this and follow in its footsteps.

In the end, Euro countries, as well as each and every economy in the world, has to solve its own problems and aim to always stabilize it financial markets. Come to think of it, it is always the consumers who end up carrying the burden of governments’ problems and mistakes, greatly affecting their personal finances and life as a whole.

Title Post: Surviving the euro crisis
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Author: bagashp

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