Title: The Eurozone and the Economic Crisis: An Innovative Swot Analysis
Abstract: ABSTRACT. The euro area debt crisis, which began in early 2010 in Greece, became existential since unemployment reached new highs and business and consumer confidences have worsened as recession fears looms. Whether the area and the common currency survive this crisis will be a matter of how the political class learns to cooperate among themselves, how society deals with economic measures, and if the markets stop being shortsighted and focus on the long-term. The purpose of this paper is to use a SWOT analysis to present how this crisis has affected the Eurozone by studying the weaknesses and threats that the project is facing, as well as which opportunities and strengths this crisis might bring if politicians, society, and markets work together to overcome the situation. This paper highlights that the main strength of the project rests on the attitude of society that is, up to this point, silently coping with a very difficult economic situation and tough restructuring measures that are negatively affecting their purchasing power and living standards. The paper also elaborates on how the role of the European Central Bank is the Eurozone's main weakness. This crisis has shown that there are plenty of opportunities for the Eurozone to become the political and economic power that the founding fathers envisioned, if the fiscal pact is implemented and governments improve their finances. However, there are a number of threats, the most important being the high price of oil, which may hinder recovery.JEL Codes: E4; E5; E6; H6; H7Keywords: economic crisis; Taylor Rule; quantitative easing; Fiscal Compact; stress test; living standards.1. IntroductionThe euro is facing an economic crisis and its survival depends on a number exogenous and endogenous factors. More importantly, the possibility of an economic recovery is fading and the region is feeling the economic, social, and political pains of recession. However, the Eurozone is not the only area suffering economic sluggishness. The International Monetary Fund (IMF) announced a lower forecast for global growth in 2012 and it explains that World Economic Outlook (WEO) projections indicate that global growth will moderate to about 4 percent through 2012, from over 5 percent in 2010. Real GDP in the advanced economies is projected to expand at an anemic pace of about VA percent in 2011 and 2 percent in 2012, helped by a gradual unwinding of the temporary forces that have held back activity during much of the second quarter of 2011.1 (2011, XV)2. The Strength: Euro Skepticism and Social UnrestThe scale and persistence of the economic crisis that is affecting the European Union for the past three years is taking a toll on European public opinion. Two main questions are at stake. First, how this economic crisis has affected public opinion on the role of the euro must be analyzed. Second, how the need for economic reforms is affecting European public opinion on the project.This section uses the findings of the Eurobarometer 752 (Spring 2011) to conclude that society is blaming the euro. The single currency is not perceived as a tool that has helped overcome the effects of the crisis. However, society agrees that the reforms undertaken by most of the countries and the reforms that are to come are very much needed in order to solve the current and future economic and fiscal problems. Most importantly, society understands that these measures are needed to put the countries on the path to recovery. This attitude shows that society understands the problems and is ready to endure the painful reforms. This is the biggest strength of the European project.More than half the interviewees - 51 % - think that the euro has not cushioned the effects of the economic crisis, while 37% defend the role of the single currency. The Eurobarometer shows that the residents of the Eurozone are much more likely to agree that the euro has had a cushioning effect (42%) than those outside of it (30%). …
Publication Year: 2014
Publication Date: 2014-06-01
Language: en
Type: article
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Cited By Count: 2
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