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

Introducing the foreign trade sector, Introducing the Foreign Trade Sector ...

Introducing the Foreign Trade Sector  Most economies in the real world are open economies. They engage in trade with other economies. Goods and services are exported and import

Medium run adjustment - economy adjustment, Suppose the economy is currentl...

Suppose the economy is currently in recession, and the exchange rate if fixed using the IS-LM model. a) Explain and illustrate the economy adjustment (in the medium run) b) E

Name the largest budget deficit country, Name the largest budget deficit co...

Name the largest budget deficit country In 2009 Greece was eurozone country with largest budget deficit (about 16.0% of GDP), while Finland was the country with the smallest bu

What is the meaning of deindustrialisation, What is the meaning of Deindust...

What is the meaning of Deindustrialisation Deindustrialisation or structural decline of many manufacturing industries along with activities like coal mining is associated with

Probabilities, Compute the following probabilities a) If Y is distribute...

Compute the following probabilities a) If Y is distributed N(1,4) find Pr(y ? 3) b) If Y is distributed N(3,9) find pr(y>0) c) If Y is distributed N (50,25) find pr(40?Y?5

Economy could become stuck, According to Keynes, the economy could become s...

According to Keynes, the economy could become stuck at a low income level if: A. aggregate demand and aggregate supply are independent of one another. B. declines in aggregate dema

Important for policymakers, Why is it important for policymakers to conside...

Why is it important for policymakers to consider both the direct and indirect effects of public policies?

National income, what are the advantages and disadvantages of a national in...

what are the advantages and disadvantages of a national income and green GDP? national income figures are often used to compare living standards across countries and through time.

MPC, A change in government purchases of goods and services results in a ch...

A change in government purchases of goods and services results in a change in real GDP equal to $200 million. Assume the absence of taxes, international trade, and changes in the a

Write the mass balance equation, Environmental engineers and scientists are...

Environmental engineers and scientists are becoming concerned about pharmaceuticals in the environment. An antibiotic is discharged into a small lake at an influent concentration o

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