The Euro in Crisis: Decision Time at the European Central Bank

855 Words Jan 28th, 2015 4 Pages
Concordia University – School of Management
MBA – 506
The Euro in Crisis: Decision Time at the European Central Bank
LaRisha Baker
Professor: Tom DiCorcia
November 30th, 2014

Introduction

The European Central Bank (ECB) is the central bank for Europe's single currency, the euro. Its main task is to maintain the euro's purchasing power and maintain price stability in the euro area. The euro area comprises of 18 European Union (EU) countries, of which Greece is included (European Central Bank, n.d.). As the EBC holds extraordinary decision-making power, this will in effect have an impact on the financial economy of Greece. From this case analysis, the ECB must decide whether to purchase or to not purchase Greek sovereign debt
…show more content…
4. Cut spending: cutting government spending would save currency, therefore making more currency available to repay debt. However in the case of cutting spending as well as raising taxes, this could stifle the economy, as people have less money to spend.
5. Liquidate: Though this is suggested as a last resort, Greece should consider liquidating some of its prized assets, e.g… monuments, land, sculptures.

Conclusion

Based on the information presented, it would be prudent for the ECB to provide financial support to purchase Greek sovereign debt. As part of the EU, to keep the union and the euro stable, all members must have a healthy financial bill of health. It would be in the best interest of all the members of the EU to support a bailout. In addition to granting a bailout, strict repayment systems, restructuring and fiscal policy must be implemented to ensure this does not happen again.

References

Altman, D. (2012). Foreign Policy: 5 Easy Solutions To The Greek Crisis. Retrieved from: http://www.npr.org/2012/05/18/152990481/foreign-policy-5-easy-solutions-to-the-greek-crisis

Strupczewski, J., O'Donnell , J., & Baker, L. (20112). DailyFinance. Retrieved from: http://www.dailyfinance.com/2012/07/27/greek-debt-crisis-european-central-bank-haircut/

Trumbull, G., Roscini, D., & Choi, D. (2011). The Euro in Crisis: Decision Time at the European Central…

Related Documents