Measures to Enhance Eurozone Recovery
The financial crisis faced by some European nations is a great threat to the global economy, which requires effective and appropriate measures to enhance Eurozone recovery. In fact, the Eurozone holds a significant place in the global economy such that even the slightest depreciation has scorching impacts on a number of countries across the world. In order to avoid these consequences, the European Union and other players in the Eurozone have come up with measures to facilitate recovery, while also avoiding a repetition a similar crisis.
In the wake of the Euro crisis, it became clear that there were cracks in the structures of the European economies, like declining competitiveness. Besides, it also revealed shortcomings in the financial and general economic union. This implies measures to enhance the recovery of the Eurozone should be focused on not only improving financial stability but also economic governance, and supporting employment and growth.
Key Measures to Enhance Eurozone Recovery
The latest statistics from the Eurozone indicate that there is a possibility of recovery from the crisis. As a result of this, there are various measures to enhance Eurozone recovery that have been proposed by the European Union, member states and other global parties. The member states of the Eurozone agreed on a wide range of reforms and terms aimed at cushioning them against such shocks in the future.
Owing to the heat of the Euro crisis, measures were taken, which were not provided for in the Treaty of the EU. One of them was the creation of the European System of Financial Supervisors (ESFS). This body is charged with gathering entities, which conduct financial supervision at the national and EU levels. Several other bodies were also created to oversee various financial sectors in order to mend the weak links. These include the European Banking Authority, European Securities and Markets Authority among others.
At the time of creating the ESFS, the EU also adopted the Euro Plus Pact. This is aimed at achieving a new quality of economic policy coordination in order to enhance competitiveness. This will in return ensure a significant increase in convergence. From 2010 to 2012, the EU also introduced the European Financial Stabilization Mechanism (EFSM) and the European Financial Stability Fund (EFSF). However, these measures did not last long, in June 2013, the European Stability Mechanism (ESM) was created to replace them.
Initially in October 2010, the Eurozone Heads of State agreed on the need for the signatories to the EU to come up with a permanent mechanism for solving such a crisis so as to safeguard the financial stability of the entire Eurozone. In line with this, the European Council signed an agreement to amend Article 136 of the Treaty on the Functioning of the European Union. This article requires that member states who use the Euro as their currency may create a stability mechanism to be implemented for the purpose of safeguarding the stability of the Eurozone. The issuance of any required financial assistance under this provision is made in subject to strict conditionality.
Following the amendment to Article 136 of the TFEU, the EU created the ESM. This is an organization created to deal with the issues of risk to financial stability. It has an authorized capital of 700 billion euros, which could be loaned to Eurozone countries in financial difficulties under ESM obligations.
The European Central Bank announced on September 2012 that it will be purchasing, if necessary, short term bonds held by Eurozone countries in the secondary market in an effort to enhance recovery. This decision is mainly aimed at cutting down the market rates experienced by countries faced by the crisis. The banking union also introduced new rules in January 2014, which authorize early intervention in the event that banks are facing problems.
Despite the various measures to enhance Eurozone recovery, it is clear that the crisis has not yet been dealt with. In fact, the economy of the Eurozone is still not doing well and this shows that there are still certain factors dragging it down. Unless the measures are well implemented at the right time and through the appropriate mechanisms, the recovery is likely to drag on for way too long.
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