Table of Contens Introduction 2 1. Foundation of Euro Zone 2 1.1. Background 2 1.2. Optimum Currency Area 3 1.3. Is Europe an Optimum Currency Area? 5 2. Account imbalance in Eurozone 6 2.1. Captial inflow from outside of eurozone 7 2.2. Bond interest rate convergence after eurozone introduction, it increase raising capital of periphery countries. 10 2.3. Price and unit labor cost increase in periphery countries -> competitiveness loss 11 3. Lehman Brothers 14 3.1. Reasons for Bankruptcy 14 3.2. LEVERAGE 15 3.3. LIQUIDITY 15 3.4. LOSSES 15 3.5. Final words 16 4. Greece Financial Crisis 16 4.1. Current Greece Financial Crisis 16 4.2. Greece before Financial Crisis 18 4.3. Industry 19 4.4. Tax
…show more content…
However, with only micro analysis, they can’t explain why Greece faced the crisis, the causes of economic recession of Europe, and the meaning of the Greek referendum. To understand this crisis accurately, we should know European Sovereign Debt Crisis first and the purpose of foundation of Euro Zone. Through this paper, we will analyze Euro zone, European Sovereign Debt Crisis, and Economic Crisis of Greece.
1. Foundation of Euro Zone 2.1. Background
After World War II, Europe countries made a blueprint for making ‘One Europe’ for preventing physical encounter. Very first one was economic unification. The reason why they did it first was that they thought if there were more active economic exchange, the war would not break out any more. In 1951, European Coal and Steal Community was founded, and passed through European Economic Community and European Monetary Union, Euro Zone has founded in 1999.
Among the member states of Euro, customs duty is exempted and barrier of financial transactions is released. Since each country has started to use one currency, the risk of exchange rate was removed so that the commodity trading became active. It is easy to understand the benefits and advantages brought from Euro Zone. Several countries was gathered and they formed one big market; it should be good.
In 1990, European Commission led a discussion about economic associating emphasizing advantages