WHY IS THERE A EUROZONE CRISIS ?

A crisis has arisen because at least France and Italy of the 17 countries which have the EURO as their national currency, expect bigger losses for 2014 than the 3% limit of the  "Golden Rule" for the EUROZONE "family of countries".   Greece, for the second time, and Spain are also in difficulty.  

One can liken this crisis to that of a normal family which suddenly faces difficulties because its income is lower, or expenses are higher, than expected in the family budget initially.

It is true that worldwide there has been an economic depression in 2014 and this has provoked higher unemployent in the EU and in many countries everywhere. 

However, there are special reasons which explain the  EUROZONE Crisis;

a)  Some countries are orientated towards Industry,  Finance or Tourism.  
b)  Some countries, like France, have a system of high Social Benefits.  Costs soar when there is high unemployment !
c)  The legal working week in France is 35 hours.  Longer hours can be worked at overtime rates, but this increases the cost of production which then reduces competivity.           
d)  Germany needs immigrants for its factories but other countries would prefer limited immigration !
e)  The political and social options before the EURO was created, vary in all member countries but since then nothing has been done to standardise practices.

All these reasons and others mean that none of the country accounts are comparable.  In spite of this the Golden Rule applies and the overrun of expenses is limited to 3% to protect the value of the EURO !

The 11 EU countries, like Britain and its Pound Sterling, each have the right to devalue or let their currency float up or down, because they all have their own central Bank.

When EUROZONE countries face hard times they yearn  to recover their former currency. They could then use the flexibility by letting the currency float and in this way recover their competitivity ! 

It should be pointed out that recently the ECB (European Central Bank), or should one say Mario Draghi its President did just that and the EURO depreciated by 10% against the US Dollar !  Alas, this was in September. The effect was too small and too late to help France and Italy !

It will be interesting to see what solution the EUROZONE finally adopts to cover the 2014 Crisis !
 
                .