The Eurozone Crisis…

The Eurozone crisis has shown up the very different economies which operate in certain parts of Europe. For a large country such as Germany, centrally located with a very skilled workforce, plenty of capital and modern efficient industries, the low exchange rate for the Euro gives huge trading advantages, the product of which we are seeing in Germany’s growth. However a moment’s thought shows that if the Deutschemark were still the German currency, its exchange rate would be sky high, making life difficult for German business.

For smaller countries such as Greece, life is not so easy. Normally a currency union succeeds where there are capital transfers from the wealthier parts to more disadvantaged areas, labour mobility follows and a united fiscal policy would exist. Looking at it on a micro scale, within the UK taxes are taken from Herts and spent in less fortunate parts of the country, people move to find jobs and all parts of the union have the same fiscal policy. However this is not true of the Eurozone and these structural issues need to be addressed. It is only when a sensible package is hammered out, that this Eurozone crisis will be resolved.