Please reply to the students discussion below: Due to the once popular introduct

Question

Please reply to the students discussion below:

Due to the once popular introduction of the euro, many European countries united under the guise that the euro will bring forth economic stability and growth. It seemed like a good idea at first, but ever since the global financial crisis, it has been dropping fast. A few of these countries like Portugal, Ireland, Italy, Greece, and Spain are in severe debt problems and there doesn't seem to be any end in site. Unlike a superpower like the United States, those economies simply do not have the resources or the fiscal policies in place to print their own money. Although, these countries have been promised a "bail-out", I don't believe the European Central Bank have enough in its disposal to fix this mess. I believe the euro will continue to drop to record lows.

Explanation / Answer

Yes its true that one common currency has limited the powers of central banks of a country such as spain to use loose monetary policy to provide more liquidity and support growth at low cost in the market, because all the monetary policy decisions are in the hands of European central bank.But the issue is different here which can not be fixed just through the monetary policy due to huge debt burden for which there is need to take tough measures to improve efficiency and reduce costs so that gradually debt burden can be reduced. I would say ECB is doing good job as it has supported them very well due to which countries like italy could bring itself out of crisis due to huge power of ECBthrough support by Germany.

Yes in near term Euro will remain under pressure , but going forward we might see losses to decline because of strong German economy.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.