What are the crisis affect the economies of country, Macroeconomics

Assignment Help:

What are the crisis affect the economies

This crisis would affect the UK in 3 major ways.

First the UK would be unable to sell its exports to these economies if they are heavily indebted. Governments of Portugal, Greece and Ireland have already introduced austerity budgets that have dramatically cut government spending, welfare benefits and public sector wages and increased taxation. This has significantly decreased levels of disposable income for households in these countries. If they have less income they would be unable to afford UK exports that will in turn affect income of British businesses and do little to help British government reduce its large current account deficit.

Second the northern eurozone countries particularly Germany (Extract C, line 6) that has a strong economy and doesn't suffer from excessive debt are supposed to be tipped into recession by problems of the southern nations (the so-called 'Club-Med' countries). This will be especially bad for UK's macroeconomic performance. At present almost 60% of UK's trade is with eurozone countries. Germany is the second biggest export destination after USA. If German economy is pulled into recession and has to bail out southern eurozone economies in order to save the euro it would harm the UK economy. UK exporters will struggle to sell their products in Germany that will in turn harm British growth and unemployment as firms pursue to cut back on production and dismiss workers.

Third if the excessive budget deficits and sovereign debt crisis bring down the eurozone, British government will inevitably be dragged into a financial bailout. In spite of the fact that current Chancellor, George Osborne has resisted all calls for financial support for struggling eurozone economies of Greece and British, Portugal business has strongly integrated trade links with eurozone. Furthermore major British banks have underwritten German and French banks which are heavily exposed to the bad government debt in Portugal and Greece. If the Italian or Spanish banking systems collapse it will create a chain reaction which will have major repercussions in Frankfurt, Paris and London.

 


Related Discussions:- What are the crisis affect the economies of country

Gross domestic product, In 1 to 2 sentences respond to the following commen...

In 1 to 2 sentences respond to the following comment. "Cleaning your own house is not counted in gross domestic product because it does not represent economic production."

Find the break-even point, The Widget Manufacturing Company must replace a ...

The Widget Manufacturing Company must replace a widget machine, and is evaluating the capabilities of two systems. A requirement of management is that the machine chosen must be p

Determine the problems there with consumer price index, Determine the Probl...

Determine the Problems evolved with Consumer Price Index To illustrate problems involved in calculating CPI we consider MP3 players. If you measure average price of MP3 players

Components of trade policy, COMPONENTS OF TRADE POLICY: External secto...

COMPONENTS OF TRADE POLICY: External sector reforms beginning with 1991 included dismantling of  trade restrictions along with tariff rationalization, a move towards current a

Macroeconomic Analysis, Derive the conditions for steady state in the Solow...

Derive the conditions for steady state in the Solow model. What are its implications? In what respects is the golden rule different from the steady state?

Investment, What are the basic differences between the investment curve and...

What are the basic differences between the investment curve and an investment demand curve for an economy

Compute the npv-the irr the mirr, Suppose a company is considering two inde...

Suppose a company is considering two independent projects, Project A and Project B.  The cash outlay for Project A is $14,000. The cash outlay for Project B is $20,000. The company

Actively-managed mutual funds, A sample of 60 mutual funds was taken and th...

A sample of 60 mutual funds was taken and the mean return in the sample was 13% with a standard deviation of 6.9%. The return on a particular index of stocks (against which the mut

Explain the term unit labor costs, An article published in Die Zeit on 25 M...

An article published in Die Zeit on 25 March 2010 analyses the German policy that allows for only moderate increases in wages. According to this article, the unit labor costs in Ge

Faced trade-offs, Provide an example of a decision in which you faced trade...

Provide an example of a decision in which you faced trade-offs, considered opportunity costs and evaluated the options by comparing the marginal benefits and the marginal costs ass

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd