This article analysis of
the Euro crisis problems seems to simplify Europe's issues and indicates that
the continent will have very little effect on the United States economy.
The writer does not provide any analysis of why Western Europe is in the dilemma that it is—the entitlement state model of the past 40 years no longer works in a competitive, globalized world. Furthermore, no country can continue to sustain its economy in this era when workers receive vacations, retirement pensions for multiple decades, free childcare and education, subsidies for farmers, among many other things. The European leaders have not really addressed the cause of their crisis with gigantic debt to try to maintain this governmental structure. In general, they are not making the sorts of cuts, which need to be made to encourage future private sector growth.
Additionally, the actual euro currency itself is overvalued, which makes their products somewhat uncompetitive on world export markets. The reason the euro is overvalued thus far is because there is not one central bank, like our Federal Reserve, which can continually print euros and demean the value like our dollar. Also, with 17 member nations there is really no central financial allocation, regulation, banking or taxing authority.
The writer mentions that because American banks are healthy, the United States will not feel as much of a negative effect from Europe being in a crisis. American banks do have European investments which would be affected should the euro crisis escalate. In addition, American capital is allocated in the financial centers of Europe like London and Zurich, even though either respective nation uses the euro, their trading partnerships are affected. Also, many European companies are traded on the U.S. stock exchanges as American Depository Reserves, which could greatly affect our stock markets. The European banks are also shoring up their capital requirements and paring down their overall staff numbers so as to be competitive, and increase their profit margins. Furthermore, only a portion of the European banks suffered the real estate meltdown like the U.S. counterparts—Ireland, Spain, Portugal, Iceland, and Greece. Greece can never pay its debts, Spain and Portugal are circumspect, Iceland has gotten its banking system back on track and Ireland is working on taking its strong medicine to bring its economy back to the boom years.
The writer wisely asks the question of “What will happen to the U.S. economy when they are unable to pay off their national debt?” Unfortunately, the U.S. has no intention of ever being able to pay off its debt, along with a number of other countries, and what economic chaos will occur is uncertain. Greece certainly will never pay back the EU. The EU seems willing to allow Greece to remain a member if they will adhere to cutting their present budget and also adhere to the austerity program prescribed by the EU and IMF.
Perhaps the writer could have also added that there is considerable conversation and thought that some of the southern European nations should just leave the euro currency and let the stronger economies like the Nordic countries and Germany remain in the organization.
This article response, while sensible, seems too simplified and optimistic. Europe is a major trading and political partner to the United States and if their major currency were to fail or flounder, then the markets and economy here would be affected far more than what the writer stated in her analysis. The European region is undergoing slower growth at present while some countries are in deep recession, or even depression. Unemployment in Spain and Portugal is 25 percent, with 50 percent of citizens under the age of 30 not working. To me these are symptoms of very ill economies and regions, and with exorbitant debt, high taxation and no growth policies (which we also see here in the U.S.), a nation cannot see any kind of positive future. This will affect all those nations that surround them and all of their trading partners.
The writer does not provide any analysis of why Western Europe is in the dilemma that it is—the entitlement state model of the past 40 years no longer works in a competitive, globalized world. Furthermore, no country can continue to sustain its economy in this era when workers receive vacations, retirement pensions for multiple decades, free childcare and education, subsidies for farmers, among many other things. The European leaders have not really addressed the cause of their crisis with gigantic debt to try to maintain this governmental structure. In general, they are not making the sorts of cuts, which need to be made to encourage future private sector growth.
Additionally, the actual euro currency itself is overvalued, which makes their products somewhat uncompetitive on world export markets. The reason the euro is overvalued thus far is because there is not one central bank, like our Federal Reserve, which can continually print euros and demean the value like our dollar. Also, with 17 member nations there is really no central financial allocation, regulation, banking or taxing authority.
The writer mentions that because American banks are healthy, the United States will not feel as much of a negative effect from Europe being in a crisis. American banks do have European investments which would be affected should the euro crisis escalate. In addition, American capital is allocated in the financial centers of Europe like London and Zurich, even though either respective nation uses the euro, their trading partnerships are affected. Also, many European companies are traded on the U.S. stock exchanges as American Depository Reserves, which could greatly affect our stock markets. The European banks are also shoring up their capital requirements and paring down their overall staff numbers so as to be competitive, and increase their profit margins. Furthermore, only a portion of the European banks suffered the real estate meltdown like the U.S. counterparts—Ireland, Spain, Portugal, Iceland, and Greece. Greece can never pay its debts, Spain and Portugal are circumspect, Iceland has gotten its banking system back on track and Ireland is working on taking its strong medicine to bring its economy back to the boom years.
The writer wisely asks the question of “What will happen to the U.S. economy when they are unable to pay off their national debt?” Unfortunately, the U.S. has no intention of ever being able to pay off its debt, along with a number of other countries, and what economic chaos will occur is uncertain. Greece certainly will never pay back the EU. The EU seems willing to allow Greece to remain a member if they will adhere to cutting their present budget and also adhere to the austerity program prescribed by the EU and IMF.
Perhaps the writer could have also added that there is considerable conversation and thought that some of the southern European nations should just leave the euro currency and let the stronger economies like the Nordic countries and Germany remain in the organization.
This article response, while sensible, seems too simplified and optimistic. Europe is a major trading and political partner to the United States and if their major currency were to fail or flounder, then the markets and economy here would be affected far more than what the writer stated in her analysis. The European region is undergoing slower growth at present while some countries are in deep recession, or even depression. Unemployment in Spain and Portugal is 25 percent, with 50 percent of citizens under the age of 30 not working. To me these are symptoms of very ill economies and regions, and with exorbitant debt, high taxation and no growth policies (which we also see here in the U.S.), a nation cannot see any kind of positive future. This will affect all those nations that surround them and all of their trading partners.
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