Euro Zone: Italy’s Finance and Economics

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Introduction

Economics is the field of business that is concerned with consumption, production, and wealth transfer. There are different economies in the globe, for example, European Union is famously referred to as the euro. Euro is considered among the largest and most attractive and influential economies in the globe. It comprises economical giants not only in the European region but the entire globe.

Several influential countries in the union attract other members to join it due to their financial strength and influence in the global market. Therefore, market runs for any influential member of the union may break the union, for instance, bond-market run in Italy. Italy is among the most influential and successful euro members, economic problems of such nations in the union may negatively affect it and its reputation in the global market. Furthermore, failure by the union to bail it out may also lead to a collapse of the union and the use of euro currency.

Therefore, I strongly agree that a bond-market run on Italy can increase the eventual break-up of the euro as a currency in the globe in case Italy is unable to finance itself at reasonable rates and failure by eurozone resources to stretch to bail it out. The paper mainly focuses on Italy and an economic article was written in support of the same.

Background and general literature

Euro is considered among the most influential currency of an economical grouping in the globe. The union has several countries with strong and influential economies in the global market. To a certain extent, the eurozone controls a larger section of the global market. The fact that most euro members are influential in the global market has not only increased its influence in the global market but also increased attraction for membership by several member states even outside the European zone. Most countries in the union have adequate resources and deal in the production of quality and superior products around the globe.

Economic crisis for such countries results in an economic crisis for the entire zone and a decrease in value of the currency due to their influence on the zone and inability of the zone to settle their debts because it also relies on the respective country for financing (Liveris 2000).

Euro being a zone has financers that have the highest contribution to its affairs. Most financers of the union are its member states. Furthermore, resources from the respective financers are also shared equally and equally benefit the member states but they receive the highest share on profits accrued by the union. Several countries are considered financers of the euro due to their financial capability and influence, for instance, France, Italy, Germany and England among other developed countries, which has the highest influence in the global market and economy. Furthermore, the economical success of the euro member states is directly associated with the performance of the currency and influential member states. Economic crisis by an influential member state is also viewed as an economical crisis by the entire union considering their influence and position in the respective union (Pepinsky 2012).

The economic performance of the eurozone attracts other states to join the union, especially influential member states. This is because such members are not only influential in the eurozone but the entire globe. Influential members also hold the highest share and chances of such countries facing an economical crisis are limited compared with other member states. It is also assumed that since influential members have the highest share in the zone, in case they are faced with an economical crisis the zone should be able to use its resources to bail them out.

Failure by the zone to adequately and effectively use its available resources to bail such a state may lead to the collapse of the entire union and fail to attract potential members. Members of the zone assume that economic crisis by either of the influential member state and failure by the zone to bail it out is an indicator of the collapse of the zone. The member states assume so based on the resource contribution of the influential states in the union. Therefore, other members assume that if the union cannot bail an influential member state that holds a high share in the union then the union may not be able to bail them too hence the break-up of the euro (Engelen ‘et al2011).

Theoretically, member states and other countries in the globe assuming that the most influential countries in the eurozone may not face an economic crisis to an extent that they require bail. However, in case they are faced with such a situation, the eurozone should be able to bail them out considering their financial influence in the union and the role such countries play in the co-existence of the union and attraction of other potential members based on their economical performance.

In case such countries are faced with such situations and failure by the zone to bail them out, then it might be faced with an economical crisis decreasing their financial contribution in the entire zone. Subsequently, this can also lead to the decreased financial ability of the eurozone decrease in euro value and decreased economical activities. Eurozone is an economical union hence decreased economical activities may lead to withdrawal by some member states leading to the break-up of the euro. It can also affect the global appeal that the euro has and failure to attract potential members due to speculation of a break-up (Conley 1998).

Global effects of an economic crisis in developed countries: Influential Eurozone members

The article by Jennifer Jeffries on the effects of economic crisis with main focus on the influential member states in the eurozone is related with the topic concern on Italy. The article mainly focuses on the economical effects of the economic crisis facing developed countries on the globe and regional economic unions where they belong. The article not only focuses on economic crisis effects on respective countries and effects of rising or fall in their currency value globally but also the successive effects on the global economy and regional economic zones where they belong. It highlights the possibility of break-up or collapse of the union in case such countries are faced with an economic crisis and cannot be bailed out.

Furthermore, the article reveals that economic crisis on influential states globally and or regionally may lead to regional and or global economic crisis considering their economic influence in the globe. Similarly, the article on Italy also focuses on the possibility of the Eurozone break-up in case the Eurozone may not be able to bail it out and the inability of Italy to finance itself effectively and adequately at reasonable rates (Jeffries 2001).

The article focuses on the economic effects of the economic crisis in developed countries or fall and rises in their currency values in the global economy. Furthermore, it highlights the successive effects of economical crisis in such countries on regions and the entire globe. The article argues that economic crisis in influential countries may lead to global economic crisis considering their economic influence and currency on different economic activities. The author argues that the economic crisis in such countries affects the globe because it might force such countries to limit their participation in global economic activities and concentrate on addressing the crisis in their country and currency leading to decreased global economic participation.

On the other hand, several countries may be dependent on such economic activities leading to the economic crisis in the respective countries that rely on such countries or that have economic ties with the affected state. Different hypotheses can be derived from the article by Jennifer Jeffries, for instance, the economic crisis in developed countries may lead to the global economic crisis and economic crisis in influential eurozone member states may lead to the break-up of the euro or currency value influences economic participation of states.

The ideal experiment should focus on the economic crisis in developed countries especially influential states and successive effects on the global economy and effects of the economic crisis in influential countries, effects of currency rise or fall of influential states and successive economic effects on regions or economic groupings where they are members (Jeffries 2001).

The author of the article has adequately addressed the issue of the economic crisis in developed countries and its successive effects on the global economy based on their currencies. The author has used the economic crisis in the globe in the past and its causes mainly derived from the economic crisis in developed and influential countries and effects on their currencies, for instance, the United States dollar and Japanese yen. The author has adequately analyzed how the economic crisis in the United States and Japan led to the global economic crisis considering their currency influence in the global economy.

The author has applied both qualitative and quantitative research methods in the collection and analysis of the respective data. This has enabled the author to eliminate chances of error in the analysis of the data hence adequate and effective analysis of the respective data and answering of the research questions. Furthermore, the research methods applied by the author have adequately enabled for comparison with past research on the study topic because it has enabled the drawing of realistic conclusions (Bar-Tura 2011).

Conclusions

The global economy is comprised of different countries with different economic capabilities and abilities. The influence of countries in the global and regional economies also differs. However, the economic crisis in countries with high influence on the regional and global economy may lead to successive regional or global economic crises. Furthermore, failure to bail out such countries may lead to a break-up in regional economic unions and currencies considering their resource contribution in the respective unions. Therefore, it is true that a bond-market run on Italy can increase the eventual break-up of the euro in case Italy is unable to finance itself at reasonable rates and failure by eurozone resources to stretch to bail it out.

Reference list

Bar-Tura, A 2011, ‘Economic Policy and World Organization’, Perspectives on Global Development & Technology, vol. 10, no. 1, pp. 194-212.

Conley, T 1998, ‘Global economic crisis: Effects and causes’, Economics Journal, vol. 58, no. 2, pp. 468-489.

Engelen, E, Reijer, H, Mamadouh, V and Sidaway, D 2011, ‘Turmoil in Euroland: The geopolitics of a suboptimal currency area?’ Environment & Planning D: Society and Space, vol. 29, no. 4, pp. 571-583.

Jeffries, J 2001, ‘Global effects of economic crisis in developed countries: Influential Euro zone members’, Journal of Economics, vol. 45, no. 2, pp. 207-226.

Liveris, A 2000, ‘Euro zone: Finance and economics of member states’, Journal of Finance and economics, vol. 28, no. 2, pp. 17-20.

Pepinsky, T 2012, ‘The Global Economic Crisis and the politics of Non-Transitions’, Government and Opposition, vol. 47, no. 2, pp. 135-161.

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