Euro-Zone Economy Contracts in Third Quarter Blackstone,

¶ … Euro-Zone Economy Contracts in Third Quarter

Blackstone, Brian. Wall Street Journal (Online) [New York, N.Y] 15 Nov 2012: n/a.

The Eurozone has been the subject of much attention lately. The debt crises in Spain and Greece have flooded the headlines of late. However, the problems in the Eurozone go much deeper than these two countries. Today headlines illustrated the fact that the Eurozone has experienced four straight quarters without expansion. The recession of 2008 and 2009 was mostly due to the fact that the Euro experienced pressure from overseas; especially the U.S. However the recent economic woes are more of an internal issue rather than explicable to external forces. There is some debate about whether the Euro will meet the technical definition of a recession, however despite the technical definition's requirements; nearly everyone is concerned with the outcome regarding the slow economic development in the seventeen members Eurozone.

The Euro is a key economic driver of the world economy and the success or failure of the Euro could have drastic implications on the world's economy. Political turmoil in Greece has led to rioting and mass strikes. Both Greece and Spain have enormous unemployment rates. However, the European response is different than what is found in the United States for example. In the U.S. The federal government and the Federal Reserve have a substantial amount of power to deal with any financial crisis. However, by contrast, in the Euro the participating governments have far less power and most are looking to Germany and France to lead a response. Yet the economists and politicians in these countries must answer to their domestic population who are not comfortable with these countries bailing out the whole of Europe, to say the least.

Therefore the developments in the Euro are interesting and could have substantial implications for the rest of the world's economy. If Greece, and especially Spain, were ever to leave the Euro this would create a great deal of uncertainty surrounding the sustainability of the Euro as a whole. It is entirely possible that the Euro could still survive since both the economies of Greece and Spain only represent a fraction of the total GDP of the Euro. However, defaults by either of these governments could send shock waves throughout the rest of the global financial system that would be much worse than the fall of such companies as AIG and Lehman Brothers who helped spark the last global recession.