Austerity And The Global Financial Crisis
In 1992, the European Economic Community was established with the ratification of the Maastricht Treaty. The euro was introduced and has been adopted by Eurozone countries in 1999. National currencies started to be substituted with the euro in 2002 and the euro became the official currency of the Eurozone. The Global Financial Crisis-
Although the U.S. economy had formally dived into recession in 2007; the sudden collapse of the investment bank Lehman Brothers catapulted the Global Financial Crisis into a new era. Millions of Americans were deleteriously affected from the burst of the housing bubble. The contagion rapidly spread across Europe, economies like Pakistan contracted and governments like Germany helped …show more content…
Austerity is a set of policies that reduce government budgeting deficits. It primarily involves spending cuts and tax increases.
The countries have money to prevent their economy from stalling and to keep credit flowing. It thus prevents immediate collapse of the economy and prevents unnecessary spending. It also aims to make the debt more manageable and sustainable.
The countries have to make many big cuts to government services such as welfare. This has led to many demonstrations and protests against austerity. Some countries that have employed austerity fare worse economically now than at the beginning of the crisis.
Austerity has worked for some European countries, but Greece’s economy has been severely damaged by austerity. Arrangements for more loans must be more lenient on countries. Countries should be able to hold the money and used it to invest in infrastructure instead of having it immediately funneled to debt holders. …show more content…
If countries are not allowed to borrow excessively, it will prevent countries from having a debt crisis.
Countries will have to surrender sovereignty to a Higher Power. Euroscepticism is a growing ideology in many European states and this will incite more violence against the EU.
A fiscal union, or a much more tightly employed fiscal policy may be the solution to halt calamitous spending and prevent these problems from arising again. It could cause controversy as countries would not be able to have full autonomy over the management of the government 's finances.
Less integration/ Breakup
Many economists believe that the “Euro Project” has failed. The EU has been criticised as anti-democratic and socialist and is a major catalyst for causing many countries to fail economically.
Countries can regain their autonomy and currency. This will allow them to be able to devalue and revalue their currency. They will be able to make their own laws and also be able to make their own trade agreements with other countries.
Freedom of movement in Europe and difficulties with currency and tariff fees could result. Many student and people of poorer European countries could be disadvantaged if other countries decide to secede from the