BW- DO NOT DO FREYONOMY YET!!!!!!!!!!We will do it at the end if we have timeTues B2 & B3 moved to room 153F

THE EURO CRISIS 101

THE EUROPEAN UNION EU- an economic and political union of 27 member states which are located

primarily in Europe. Utilizes a single market in which the euro is the single currency shared by

(currently) 16 of the European Union's Member States The introduction of the euro in 1999 was a major step in European integration. Around 329 million EU citizens now use it as their currency European Central Bank- responsible for the monetary policy for EU member

nations (similar to the Federal Reserve)

EU Member Nations:

1999Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland

2001 Greece2002 Introduction of euro banknotes and coins2007 Slovenia

2008 Cyprus, Malta

2009 Slovakia

BENEFITS OF THE EURO Trade and Travel are easier It is more efficient.

Using a single currency increases price transparency, eliminates currency exchange

costs, and facilitates international trade It gives the EU a more powerful voice in the

world. Economic integration prevents political

conflict and war

COSTS OF THE EURO Economic Interdependence

Disadvantage Bad things that happen in one country can affect others

Because members participate in a single market, debt in one country can spread and cause problems in others

WHAT CAUSED THE EURO CRISIS Lack of economic growth

Many European countries have turned to service industries and are not manufacturing anything anymore

As result, they have incurred a lot of debt due to their balance of trade More imports than exports

Germany is the one exception Produces cars, planes, engines, and technology Remains the strongest country in Europe

EURO CRISIS VIDEOPIGS Portugal Ireland & Italy Greece Spain

Video discuss their debt that they can’t pay (they might default) and questions who will bail them out

IMF- International Monetary Fund Goal to improve the economies of its member countries by fostering

global monetary cooperation and facilitating trade Countries contribute money to a pool from which countries with

payment imbalances can borrow funds on a temporary basis.

WHAT CAUSED THE GREEK DEBT CRISIS Greece added in 1981 during the Cold War b/c despite

being one of the EU’s poorest countries, the allies wanted access to the Balkan area.

Tourism was one of main revenue generators in the Greek economy.

But in the early 2000s, tourism in Greece started to decline due to overcharging

The cost of the Olympic games in 2004 was huge. Greece needed to build roads, stadiums, public transport and airports. The cost of doing this was astronomical and was financed by the EU.

Political corruption Lack of economic growth- doesn’t produce anything

More imports than exports (balance of trade) Can’t produce more money to fix its debt

GREEK CRISIS VIDEO Video discuss Greece’s large debt Fall 2011- Greece can’t pay its debt and was in

danger of defaulting (essentially like declaring bankruptcy)

Video discusses the dilemma over bailing them out Pro bailout= if Greece defaults countries in the EU

and throughout the world will lose $ because their debts won’t be repaid

Anti- bailout= Greece will become even more dependent on foreign help and it may take a long time to fix the problem. Why should other countries have to pay for Greece’s irresponsibility? (ex. increased taxes in other EU states)

EURO CRISIS UPDATE Greece is still teetering on the edge. It hasn’t

fallen into the toilet yet because it was bailed out. It received money to pay its debt so it won’t default on its loans Greece received approval from Germany (the strongest

country in the EU) and was bailed out Greece is now able to partially pay its debt (like

consolidating your loans) Problem- Countries and people that invested in Greek

bonds got screwed because the bonds are only being paid back partially

Meanwhile problems in Spain, France, Italy and Ireland continue. Spain- 25% unemployment. 50% unemployment of

college grads - occupy movement similar to occupy Wall street