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Rationale for creation of European Union
The European Union was established in 1957 shortly after the Second World War. It was formed with an objective of bringing together the European countries since the European leaders did not want to suffer a war such as the World War II ever again.
The past decade has been an extraordinary period of success in numerous ways. The European Union has accepted twelve new states; this happened as a result of the amendment of the structures of leaderships and procedures of voting provided by the Lisbon treaty which eased the decision making process between the member states.
The original number of members who began the European Union was only six. Nowadays, the union has expanded to 27 members. The new Europes common currency was widely accepted and relatively stable in its initial decade. However, 2010 came in with numerous challenges.
Financial contagion concerns and accumulated public debt in Greece, Italy, Spain and Portugal created a great debate over how better the fiscal policy of member states should be coordinated. Normally, proposals opposing national budgetary policy infringement against the government of French and favoring unified enforcement standards under the growth and stability pact flooded the government of British.
Simultaneously, critics were afraid that the programs of fiscal austerity in Germany and Britain would bring about the policies of beggar-thy-neighbor. By this time, the European Union had plans to merge with other member countries to form an economic union.
These particular steps lead to various economic concerns. financial crisis and unfathomable political concerns were behind these apprehensions. Some argued that this step of amalgamation would lead to the rejection of the European Union with basis of being un-democratic. The others stated that the European Union was enlarging far beyond its formal capacity to establish the economic union.
The defense secretary, Michael Portillo, mentioned that he was not ready to see the defense policy being controlled by Brussels. In actual fact, the same reasons that initially led to the formation of the European Union were the same ones that spearheaded the formation of the economic union.
Current solution to Greece Financial Crisis
The Greece crisis arose shortly after the European Union had resolved its constitution crisis. The problems appeared when the crisis in U.S. sub-prime mortgage triggered a cascade of financial disruptions. This occurrence rose the question of the endurance and strength of Europe. By the year 2010, everyone watched Greece, the 2009 deficit of Greece increased from 10% to almost 14% of GDP.
The Greek sovereign debt was lowered by the standards and poors to a (BB+) junk bond status, the two year yields on Greek sovereign debt hit the mark of 10%, rendering the Greek to approach the IMF to receive a financial bailout.
Currently, the leaders of the European Union have summoned a consensus to use both the international monetary fund and funds from Europe to assist unstable financial situation in Greece. The major crisis in Greece was brought up by numerous years of spending without restrain, failure to establish financial reforms and unrealistic contemptible lending.
These mistakes exposed Greece in a bad way during the global economic downturn. Greece has a national debt of $ 413.6 billion which is far much bigger than the countrys state budget. Today, Greece is viewed by foreign investors as a financial black hole .
These debts have led to the scrapping of pre-election promises and induced unrealistic and harsh spending cuts. Currently, Greece is in a major euro zone breach on deficit management rules; this is actually a bad show for the euro.
The Greek government has embarked on cutting on spending and is already implementing austerity measures with an objective of slashing the deficit by 10 billion Euros which is equivalent to $13.7 billion.
Slovakias role in the crisis
The major setback for the advancement is Slovakia, this is the last country in the block to rectify the consensus and assist in making the deal to bailout Greece from the financial quagmire. Today, the greatest concern is whether the politicians in Slovakia will vote positively on the agreement to stabilize the European fund in helping Greece.
Future of the EURO, threats and Mistakes made by EU
The crisis in Greece has raised many questions concerning the future of the euro. According to case study, it is clear that the EU and the euro zone are having a real trouble. The existing economic structures of nowadays are definitely flawed and will not withstand the forces and pressure they are heading to anyway. For Greece, several things are to be put in place to improve the current situation.
First, the banking systems need to be fixed: many banks in Europe are highly undercapitalized, fatally over-leveraged, and exposed to numerous debts. The most important and vital steps that the government should take to rescue the euro is to carry out careful stress test accompanied by capital injections.
In simple terms, the European government must take a bold step of putting the risk back to its own place. It means that the European economy should be given back to the bondholders. The Greece crisis is a major blow to the European Union, but the euro will be in a position to withstand the tide if there are well-calculated strategies.
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