Wednesday May 25, 2022

Eurozna is at a crossroads. Does that mean I’m late?

It has become inevitable. Following the sharp decline in Czech bonds, which was followed by publicly revised data on the local budget deficit, enough government assistance to the European Union and the International Monetary Fund was very likely. The distrust of the financial market in Greece has reached such a level that the financing of the Greek debt has become unsustainable. Greece has found itself on the brink of an abyss. In fact, the bag thus decides the fate of the euro area.

It is not technically possible to save Greece. It will turn the euro area into a truly viable project. Sometimes as an argument for the viability of one year of existence. The past decade has provided an exceptionally favorable economic climate, and although the situation in the euro area has been steadily deteriorating. This may not be apparent from long information, but the overall view is especially clear: without radical changes, the existence of the euro area will be problematic.

eck press George Papandreou.

Rise and pd responsibilities

The problem lies in the absence of consistency of currencies and fiscal policies. While there is only one new policy in a new union, there are as many fiscal policies as there are countries. Sometimes the national fiscal policy may be in line with the economic situation of the country and the policy of the European Central Bank, other times it may not. The rules of fiscal discipline should be the minimum precondition for the compliance of this triangle. Therefore, in 1992, the Maastrichtsk treaties established limits on the budget deficit and public debt. Three years later, German Finance Minister Theodor Waigel proposed a Stability and Growth Pact, anchoring the rules of fiscal discipline.

Tm bag good first con. In 2002, Ecofin officially rejected the European Commission’s proposal to issue a preliminary warning against the high deficits of Germany and Portugal. This was repeated a year later in the fall of Germany and France. This was followed by an effort to erode the rules of fiscal discipline, which many politicians seemed to be stuck with. The “SPCH” arrived in 2005, when the “prunj” law of the Stability and Growth Pact was approved.

Such a bottom line is an invitation to moral hazard. Together, I lent credit to the member countries of the German Bundesbank, nor did it oblige them to budget disciplines. Countries that have long-term problems with budgets have rushed to the eurozone. The changeover to the euro has given them several more years of carefree life. According to their debts, this will be a problem and the pain will be fixed.

Basic simple limits for the budget policy of the member states of the Union are not a regular one. However, they are better than a one-sided systematic tendency to excessive deficits. Unfortunately, even this temporary provision was not fully obtained, and the professional point of view often gave way to the short-sightedness of politicians.

European Building

European Commission building in Brussels.

A common monetary policy should be followed by a common budgetary policy. This, of course, would mean a known limitation of national sovereignty. Today, public finances represent a key instrument of political power, and local politicians would lose their influence in front of Brussels. It would not be so easy to promise from public funds somewhere before the election, it would not be possible to buy a “portion of bear” votes. The euro area would essentially converge towards a political union.

Sisyfv balvan

Lack of coordination of economic policies has led to the creation of known internal and external imbalances in some countries. At the arrest of the whole chain is an inappropriate budget that does not correspond to economic development.

Sisyfos t

Sisyfos thne svj boulder; Titian’s face

Greece has the highest long-term deficit. Since joining the euro area, the average budget deficit in this country has been 6.1 percent of GDP. The fiscal stimulus has helped accelerate economic growth – the performance of the Czech economy has increased by 31 percent since joining the euro area. Price development goes hand in hand with real development. The price level in Greece has risen by 33 percent at the same time, which is one of the highest values ​​in the monetary union. Because exchange rates in the monetary union cannot be adjusted, this price increase represents an appreciation of the real exchange rate or a loss of competitiveness of the economy. This was reflected in the current account deficit, which reached 11.2 percent of GDP last year and an average of 9.4 percent of GDP since the Czech Republic joined the euro area.

Due to fiscal, the Czech Republic suffered undisciplinedly from these serious ailments: high budget deficits, called inflation, and widespread external imbalances.

Riots in

Riots in Greece (April 23, 2010)

The Portuguese economy is showing a similar trend. The budget deficit averages three percent of GDP since the country’s entry into the euro area. The performance of the Portuguese economy has since increased by only eight percent, while price levels have risen by 31 percent. Also in Portugal, there was a sharp reduction in competitiveness and the current account deficit reached ten percent of GDP last year.

spain was on it with budget deficits of sweat lpe. In the first half of the last decade, they were close to zero. In 2005 and 2007, even Spain achieved a slight surplus, after which the situation deteriorated sharply. Last year, the deficit was 11.5 percent of GDP. Even in Spain, there was no rapid internal appreciation through rising prices and loss of competitiveness.


The Portuguese Socialist Party (PS) defended its victory in the election with Prime Minister Jos Scrates (September 28, 2009)

One healthy apple from estncti

The view shows that the euro area is one of the only countries with a healthy budget policy – Finland. This is on the estnctilenn association of countries a sad balance.

A simple analysis can show that individual countries have to move towards balanced budgets in the long run and can afford debts in the long run, not hundreds of percent of GDP, if the fiscal situation is to be considered sustainable in the long run. In the current constellation, it is only a small time that deepening imbalances are growing, increasing the vulnerability of euro area economies and lagging behind in the global economy.

Today, the euro area is known in the world as an area with a rigid population demotivated by vast social systems, lagging technologies and slow economic growth. Over the last ten years, the euro area economy has grown by an average of 1.4 percent. Of the developed countries and economic areas, only Japan can boast the hormone with an average growth of 0.7 percent. The United States has grown by an average of 1.9 percent a year in the last decade, non-G7 countries and the euro area have grown by 3.3 percent, and the global economy has grown by 3.6 percent.

At the time of the creation of the euro area, this economy accounted for 18.5 percent of global GDP, now it is about 15 percent, and by 2015 this share should fall to 13 percent, according to IMF estimates.

Economic downturn is declining in the field of world politics. The dominant platform of the two used to be one at the same level of the G7 group, today there are still bilateral one G2, ie the USA and the new one, and the rising importance of the BRIC group, possibly meeting at the same broadly defined G20 group.


Ministers of Finance and the Central Bank at the G20 summit in London (5th from 2009).

Unfortunately, the problems of the eurozone lie on the ground, which are business and financial ties. Areas that mainly depend on the euro area include Scandinavian countries outside the euro area (Sweden, Norway), Central and Eastern Europe, Russia and North Africa. Klov is, of course, the euro area for the Czech Republic, where according to imports into the euro area it reaches 65 percent of the total volume of imports.

About the euro with reason, not feeling

Doubts about the functioning of the Union’s currency and its problems alone cannot affect the weight of the adoption of the euro in countries that do not go to the euro area. The United Kingdom and Denmark have negotiated exceptions. The Czech Republic refused to accept the euro in a referendum and traded in the euro area because it did not meet all the necessary conditions. With the accession to the EU, the countries of Central and Eastern Europe have also committed themselves to striving to adopt the euro. The Czech Republic has no choice in this regard. Two twists come out of it.


Dnsko, Koda

Firstly, it is necessary to prepare the fines for membership in the euro area. The economy must be able to function over time and absorb meshes and crises of various kinds, even without its own monetary policy and exchange rate as an important balancing mechanism. The decision on readiness to adopt the euro will ultimately be political, however, it should be in accordance with an impartial expert assessment of the cost and delivery of adopting the euro at a given time.

Secondly, the Czech Republic should strive to correct the rules necessary for the stability of the euro area and their compliance. It is not just that we are ready for the euro, but that the euro is ready for us.

The Czech crisis has put the euro area at a crossroads. The stabilization of the Czech Republic is important, much more important is what the euro area has given for its fate. One hundred years of the history of the euro has hardly given rise to a common currency that would contribute to the prosperity of Europe and the satisfaction of its citizens. And it will not be until the euro area changes.

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