Demand Forecasting – Meaning, Objectives, Classification & Characteristics
Forecasting For an organization to provide customer delight it is important that organization can understand what customer wants and how much does they want. If an organization can gauge future demand that manufacturing plan becomes simpler and cost effective. The process of analyzing and understanding current and past information to understand the future patterns through […]
Waiting Line (Queue) Management – Meaning and Important Concepts
Introduction The waiting line or queue management is a critical part of service industry. It deals with issue of treatment of customers in sense reduce wait time and improvement of service. Queue management deals with cases where the customer arrival is random; therefore, service rendered to them is also random. A service organization can reduce […]
Introduction to Business Continuity Management
We all need the support services that we often take for granted to be available to us 24/7 and whenever needed. Right from the telephone that we use to the internet connection, any downtime that this service faces is viewed unfavorably by us. But, given the uncertainties of the 21st century where a minor dislocation […]
How the Digital Age is Transforming Work, Life, and Business
The Transformations Wrought About by the Digital Age This is the age of Smart Machines that can perform tasks that hitherto were being done by humans. Right from manufacturing automation where robots work on the factory floor to make products, to Artificial Intelligence driven algorithms that have predictive capabilities, and Big Data enabled Search Engines, […]
Role of Project Champion in Six Sigma Project
The Project Champion is the person responsible for identifying the Six Sigma Project and making it an organization reality. The role of this kingpin in the conception and execution of the Six Sigma project has been detailed in this article. Stage at Which Required The Project Champion is required at very early stages of the […]
When the global economic crisis broke out in the autumn of 2008, the impacts were felt around the world. However, it affected the US primarily though countries across the world felt the reverberations to some extent.
When the crisis broke out, Europeans were smug and complacent in the assumption that the crisis would not affect them the way it did the United States and other countries. This assumption soon gave way to disbelief as the first rumblings of the sovereign debt crisis began to be felt in late 2009. The sense of relief at not being hit badly by the global economic crisis soon gave way to panic among the various capitals of the Eurozone member countries.
When Greece became the first casualty of the crisis, Spain and Italy insisted that they are “not Greece” and hence, they would not be affected by the crisis.
When Spain and Italy began to feel the heat, other Eurozone countries insisted that they are not Spain or they are not Italy and hence, they would be spared the sovereign debt crisis. Of course, as events over the last few weeks have revealed, there is no country barring Germany that is left untouched by the Eurozone debt crisis.
The heart of the problem regarding the Eurozone crisis is that the member countries have too much debt and too little growth. As has been mentioned by many economists, manageable debt is a sign of a growing economy. However, when the debt is unsustainable and reaches alarming levels as a percentage of the GDP (Gross Domestic Product) then no amount of quantitative easing or “printing money” in nonprofessional terms can help the countries.
For instance, all the PIIGS countries (Portugal, Ireland, Italy, Greece, and Spain) have debt as a percentage over GDP well above 200%. Hence, either they produce miraculous growth that would help them repay the debt or undertake severe austerity, which they are doing now on the insistence of the European Central Bank, the International Monetary Fund, and the World Bank. This has led to extreme hardships being inflicted upon the common people with the result that protests and strikes have become the order of the day in these countries.
The point here is that like so many western countries, the Eurozone countries lived beyond their means during the boom years and now they are reaping the worst fruit of having to toil for repaying the debt.
Of course, the European policymakers proclaim that they have solved the crisis by extending loans and bailing out the troubled countries in the Eurozone. However, more debt is not the answer to debt and unless the issue is tackled by having common fiscal policies across the Eurozone or these PIIGS countries defaulting on their debt, no amount of Central Bank Intervention is going to help.
Considering the fact that the unemployment among the youth in these countries is above 30 percent, it is anybody’s guess as to who would pay the debt back to the lenders.
As happens with individuals who have lived beyond their means and have to contend with rising EMIs (Equated Monthly Installments) and have no choice but to default on their obligations, the European countries have no other option left but to break away from the Eurozone and return to their respective currencies. Though this option would entail some pain initially and calls for more sacrifices over the medium term, this is the best bet in the longer run for all stakeholders.
Finally, the stakes are high for the Eurozone as any default by the member countries needs to be managed and the outcome must not be a disorderly default but one where the impact to the entire global economy is minimized and the responses structured. This happened in March 2012 when the lenders of Greece were asked to forego a portion of their loans. However, in subsequent months, we have had more bickering among the European countries instead of consensus on what needs to be done.
Your email address will not be published. Required fields are marked *
What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
