Effects Of Euro On The Euro

Submitted By carlygoldberg
Words: 2146
Pages: 9

Across Europe economies are unfolding in from of our eyes. Each failing economy faces the same problem, they are part of the Eurozone and cannot make many decisions for their own to try and fix their economy. The Eurozone is made up of 17 nations across Europe, including Germany, Italy, France, Greece, Ireland, Spain, Portugal, and more. Each of these countries mentioned are huge determining factors in whether or not the Euro will survive. It is widely believed that the euro will survive, but it seems to be more widely believe that it will not survive. Investigating the different aspect will help determine a solution. Researching the history, looking into Germany's affect, seeing how the European Central Bank will support the Euro, comparing the Euro to the USD,Looking at the Austerity across Europe and discussing the current Fiscal Union in the EUrozone are all major aspects when trying to solve whether or the Euro will die out or thrive.

While investigating it becomes crucial to look at the trends of the markets and the effect each nations economy has on one another. Essentially, looking at how all of this happened. The euro started in 1999 with only 11 of the what would be 17 nations. Interestingly enough Greece was purposefully left out at first because of their weak economy and the fear of dragging the Euro down. In 2002 Greece became the 12th country to join the Eurozone, which ultimately proved to be bad. The huge debt crisis led to the euro dropping to a 14 month low in 2010. This clarified how much of a toll on nations economy can have on the Euro. The worst part about it is that is it not only Greece who are in a mass debt crisis currently. Ireland, Spain, and Portugal are also in recessions with Italy and France right behind struggling to keep a healthy economy. All six of these countries, Including Greece, are the lead debtors in the Eurozone and it seems to be a domino effect. Because all of the countries are tied together if one country defaults they will all start to do the same. It seems that these countries in the PIIGS(Portugal, Ireland, Italy, Greece, Spain) never really benefit from being part of the euro. The trend lines for each countries account balances, show that they went down when the Euro first started stayed constant for a few years and then plummeted when the global economies started to decline. We see the most drastic change in Greece, whose GDP took the worse fall out of everyones in 2008. So what does this mean? With these countries on a downward spiral and other countries falling close behind, it is widely believe that they will take the Euro down with them.

Germany is also a huge determining factor in the survival of the Euro but for the opposite reasons then the PIIGS. Germanys economy is far from failing it is thriving in many ways. When we compare their Account Balance trend line we see Germanys GDP is in an opposite line of the PIIGS. It started low as well and then when constantly up until they saw minor drops in percent in 2008. Germany is now left with the dirty job of the Euro crisis, they have to try to save the Euro and make decisions to help save the other countries economies but will ultimately hurt their economy. Germany is also faced with pressure to leave the Eurozone. Germany does not want to leave the Eurozone or of the Euro to fail because overall it greatly benefits them. Germany was able to build the strong economy they have today because of the Euro and they are a highly competitive leader in trade today because of the Euro. Getting rid of it or having it fail would be detrimental to the Germans. Loosing the Euro would make the countries who are doing poorly currency to be very weak and would make countries like Germany currency to become very strong. This cause a huge problem in trade because place will no longer be able to afford to trade with Germany. However, in order to devalue the Euro to help out the other countries in the Eurozone it is popular