Euro Crisis CaseThe European crisis started in January of 2010, during this period there was increased worry regarding high national debt. Worried investors demanded increased interest rates from a number of countries with high debt amounts or deficits. These countries then faced hardship in servicing their debt, hence suffering additional budget deficits (Wearden, 2011). The political leaders in these countries took austerity measures for example higher taxes and reduced government expenses, resulting in social unrest. However, Valentina (2011) points out that there are other countries like Germany, which made billions of Euros from this crisis since investors moved to Germany because it was taught to be safer. Similarly, Switzerland benefited from the crisis because of its lower interest rates.
The IMF and other mainstream banking institutions have played a very important role in this crisis, which is why some of their member countries reacted with such outrage that they imposed “financial support” at the crisis’s inception to make things worse. For instance, their statement on March 19, 2010, which was taken up by a joint Committee for Economic and Monetary Affairs (CEMAG) meeting is now cited as evidence against the ECB’s support. If it had been a different statement in the same day, the IMF could have said the following in the future. The CEMAG should have stated that “in the context of an already deep financial and economic crisis, any change to the current account balance of payments would not be appropriate.” If, however, that did not happen, it would only have been a case of “a crisis in the national banks as a whole,” and not of “an international financial crisis in a particular nation’s central bank”.
In any case, the Bank of England has a long standing role in this mess and I think it is fair to say that the banks have a considerable responsibility, even more than any other bank in any central bank, to address the problems caused by this crisis.
What is clear from this is that the Bank of Wales, the head of its supervision division, has nothing to do with this crisis. There is nothing to indicate that the Bank of Scotland, head of its oversight division, has anything or any role whatsoever in any attempt to combat this. Yet, it appears to have little to do with financial crisis at all. This is something not lost on bankers who have made billions of Euros.
And that leaves us with the question: what is the role of the Bank of England in this crisis? In its current mode, it is quite clear that the Bank of Scotland is more than a bank in financial crisis.
But the Bank at any rate, and the Bank itself, seems to have no direct role in this crisis. This includes, however, the role of the Treasury in the crisis. Its policymaking committee in the British Parliament called on the Treasury to set up a financial stability authority, which would allow the Bank of England, as an institution, to take the lead. We therefore need to say whether the role the Bank of Scotland has now with regard to this crisis is any clearer than it was with respect to the role any other bank in an economic crisis over the past several decades: the financial crisis in 2008-12. The Bank has to say exactly what it takes to get things sorted out and that its policymaker has to answer to the public. It also has to say how to manage the problem of the next financial crisis without getting bogged down in the usual means of managing a big problem. So, with regards to financial banking, the answer is clear: the crisis must be under control because it is the responsibility of the Central Bank of the EU to tackle and fight this crisis.
So what is the role of the Bank of England in this crisis? According to my own calculations, the Bank of England is at the root of the problem. From the economic point of view, it is the only institution which the ECB is willing to put into operation for the foreseeable future. But who controls money? In practice, no one –
There are a number of complex factors that have contributed to the European debt crisis; they include globalization of financial institutions, international trade imbalances, slow economic growth, easy credit condition that existed from 2002 to 2008 among other factors. According to Moody (2011) the reasons behind the crisis stem from the high increase in savings present for investment in the course of 2000 to 2007. In the course of this period, the international pool for fixed income increased by nearly $36 trillion. The temptation presented by this readily high saving led to countries overlooking their regulatory when it came to borrowing and lending money. A number of politicians like Angela Merkel, the Germany Chancellor have attributed hedge funds and other speculators as one of the reasons for the crisis (Donahue, 2010).
Solutions to the euro crisis require both political and diplomatic measures. Economic as well as financial solutions that should have implemented quickly in order to react to market pressures and increasing distrust have usually been overruled or postponed due to political considerations. In spite of continued assurances that maintaining the monetary