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

Net present worth for this new computer system, Kermit is considering purch...

Kermit is considering purchasing a new computer system. The purchase price is $106,430. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compo

Fixed exchange rate supply and demand questions, 1.    Which function of...

1.    Which function of money is disrupted as a result of high inflation? Why? 2.    The central bank of Fiji has issued $1,000,000 in Fijian dollars. What is the size of m

Exchange rates, can a country have a current account deficit and a capital ...

can a country have a current account deficit and a capital account deficit at the same time?

Explain the real wage with example, Explain the Real wage with example ...

Explain the Real wage with example Consider following scenario. You work full time and during January 2008 you make 2000 euro after tax. A specific basket of services and good

Aggregate supply and the as curve, Aggregate supply and the AS curve ...

Aggregate supply and the AS curve The AS curve is the aggregate supply as a function of P. It is horizontal when thesupply is low and upward sloping when the s

Explain the philips curve, Problem: Describe whether, the given stateme...

Problem: Describe whether, the given statements (a-f) are True, False or Uncertain. Briefly justify our answer. Questions (g) - (h) show all your calculations. No marks will be

Perfect competition and monoploy, 1. # of sellers, # of buyers 2. entry and...

1. # of sellers, # of buyers 2. entry and exit conditions 3. product characteristics 4. short run P&Q determinations and the resulting 3 possibilities for excess profit (graphs ar

Circular flow of income in a simple economy income consumed, The circular f...

The circular flow of income in a simple economy where all income is consumed  The operation of forces in an economy can be expressed in the form of a circular flow of incomes a

GDP, Whenever real GDP declines, nominal GDP must also declin

Whenever real GDP declines, nominal GDP must also decline

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