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Quick Analysis On The Euro Crisis

quick analysis

In the year 1992, a single currency for all European Union Counties, the Euro was conceived as a concept. During 2002, 19 out of the 28 member countries in the EU started using Euro as their official currency. The main reason for adapting to this currency is for economic prosperity and political union. However, for the past ten years, Euro has suffered a severe debt crisis, stagnant economy resulting in people losing their jobs. This has resulted in more disharmony and issues in many countries.

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One of the new principles was that markets will achieve new employment strategies and efficient methods if governments could allow them to. One of the main roles of a government structure is to come up with measures that can fight against inflation and maintain a balanced budget. The EU membership places restrictions on the deficits and debts for the government as well.

Money rushed into countries like Spain resulting in inflation and increased prices. Germany managed to correct the situation by bringing down the prices. Germany did not increase the prices and deflation is very difficult to deal with than inflation. Whenever money is borrowed, they have to pay it back more in the Euro currency. This caused furthermore disturbances that were difficult to handle.

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Countries having trade surplus should take strong actions to inflate the economy at the part with weaker countries. Surplus countries will impose charges on weaker countries. Trade deficits also cause problems. To fix this, the surplus countries must reduce their prices in line with the weaker countries they are trading with.

If one country started looking at an exit referendum similar to that of Brexit, markets will respond with more capital flight than it is right now. This will result in a huge banking crisis. The political and economic effect this will have will be very complex to deal with.

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