EURO-ZONE CRISIS

Impact of Euro-zone Crisis on the business world

Impact of Euro-zone Crisis on the business world

Introduction

United Kingdom might be the frontline country affected by the Euro crisis, yet it is not the only country which got affected by the Euro Crisis. The European business market known by the name of Euro-zone is a substantial for the businesses around the world including India, china, Russia, Japan, and the United States of America. Along, with some of the other major economic powers of the world, in order to recover from the massive loss Chinese market have offered a loan to the Euro-zone, because they are very much concerned about the collapse of the Euro-zone, and it's on the business all around the world. Meanwhile, the IMF is also concerned about helping the countries by offering them bailouts. The current statistics suggest that some of the poorer countries of the world would suffer a loss of more than 152billion Euros due to the sovereign debt crisis in the Euro-zone. This will directly affect the overall trade industry, the foreign investments, and remittances.

The onset of the crisis came when many of the projects started by the United Kingdom were not profitable, because there was not enough demand for all that was offered. For example, in United Kingdom more houses were being built as compared to Germany. When an investor has no way to pay the credit goes to performing loans for the bank lending the money. When this nonperforming loans becomes heavier, the banks are in crisis, having lost, have no cash, no credit to give. The European crisis sat up when Greece said it could not pay its debt, and its accounting as a country had been manipulated. The European Union decided to bail out Greece twice, under the conditions of extreme austerity under which the Greek government was asked to pay its debts, spending cuts, lower wages in the country, etc. This has led in recent months major social unrest in Greece and other countries in the same situation such as; Spain, Ireland, and India, where there is an unemployment rate of 50%, , where they are taking austerity measures, and the investors are facing difficulties in starting a new business (Frieden, 2009).

Discussion

The impact of Euro crisis outside the European borders has proved to be a nightmare scenario for international institutions like the International Monetary Fund (IMF), and some of the major powers of the world like the United States, and China. According to the economic forecasts that were published by the IMF last September, the Euro-zone crisis has created a severe concern for most of the economies of the world. Indeed, in its economic forecasts published last September, the IMF was concerned about the consequences of a possible contagion from the sovereign debt crisis in the Euro-zone on other economies in the world. Contagion which, according to IMF, could significantly destabilize the international financial system as after the collapse of ...