ECON 2322 essay - ECON2322 ARTS2780 The New Europe ESSAY...

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ECON2322 ARTS2780 The New Europe ESSAY COVER SHEET NAME………SUSAN…BAI………… STUDENT Id………z3252854……… TUTORIAL TIME……Thurs, 9-10am… ESSAY QUESTION how has the global financial crisis affected Europe? Do the economic and financial institutions of the New Europe help or hinder the process of recovery? Declaration: This Essay is my own work and has not been submitted as an assignment in any other course. References used in writing this essay are fully documented in footnotes and the Bibliography. Signed……………………………………………………………. . Date submitted…………………………………………. Since early 2007, outbreak of the global financial crisis has been perceived to be the most severe crisis since the Great Depression, where it has pushed the European community through a number of different stages. It began with the economic growth steadily losing its momentum which later saw Europe been hit by three substantial negative exogenous shocks, commencing its very first stage. Subsequently, the economy slipped into recession and eventually widening the economic divergence in the area. Throughout these stages, the economic and financial institutions of the New Europe like the European Central Bank (ECB), European Council (EC) , International Monetary Fund (IMF), World Bank, European Investment Bank(EIB) and the European Bank for Reconstruction and Development (EBRD) have all attempted to assist with European recovery but with varying effectiveness . To begin with, the initial stage was characterised by three negative macroeconomic shocks of an extended credit cycle coming to an end, sharp increases in commodity prices and peaking housing cycles, when combined simultaneously caused an inflationary impact on Europe 1 . Since mid-September 2008, turmoil in the 1 OECD economic surveys: EURO area vol 2009/01 – 01/09
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international financial markets has eroded the once favourable financing conditions for European firms and households. The situation intensified upon the bankruptcy of Lehman Brothers, as short-term borrowing costs and interbank lending rates soared, reaching well above the European Central Banks (ECB) minimum bid rate. The energy and food prices rose sharply during this period accompanied with the appreciation of Euro, causing both headline and underlying inflation to reach 4%, which doubled ECB's price stability objective, therefore a fall in real disposable income was imminent 2 . Among this, the peaked housing cycles in a number of Euro areas have led to the decline in construction activities approximating around 6%, thus dragging down Europe's GDP growth in the short run 3 . With tighter bank lending’s, ECB have demonstrated its ability in achieving economic
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This note was uploaded on 03/25/2012 for the course ECON 2322 taught by Professor Kevin during the Three '12 term at University of New South Wales.

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ECON 2322 essay - ECON2322 ARTS2780 The New Europe ESSAY...

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