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International Internet Magazine. Baltic States news & analytics Tuesday, 22.08.2017, 21:39

Financial crisis: a decade after…

Eugene Eteris, BC/RSU, Riga, 11.08.2017.Print version
Global financial crisis began 10 years ago and led to the Union's worst recession in its six-decade history. The crisis originated not in the EU but in the US; though the EU institutions and the EU states needed to act resolutely to counter its impact. Main efforts were devoted to addressing the shortcomings of the then Economic and Monetary Union’s structures. Decisive actions have paid off concluded European Commission.

Ten years ago, i.e. on 9 August 2007, BNP Paribas became the first major bank to acknowledge the impact of its exposure to sub-prime mortgage markets in the United States, having to freeze exposed funds.

 

In the years that followed, the financial crisis turned into a banking crisis and a crisis of sovereign debt, soon affecting the real economy. The European Union fell into the worst recession in its history, which left deep marks on our citizens, companies and the EU states’ economies.

 

However, the European Commission concludes, European financial system gets back to recovery thanks to decisive EU and member states’ actions. 


Commission’s opinion

Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, underlined that “thanks to the determined policy response to the crisis the EU economy is now firmly recovering and the Economic and Monetary Union is stronger than before”.

 

However, he added “we need to build on this progress, completing the financial union, reforming our economies to foster convergence, inclusiveness and resilience, and maintaining sustainable public finances”.

 

He concluded that in doing so, the member states “should pursue a balanced approach where risk reduction and risk sharing go hand-in-hand and the unity of the single market is preserved”.

 

Another EU Commissioner, Pierre Moscovici, responsible for economic affairs, underlined that ten years after the global crisis “we are witnessing the recovery of the European economy”.  

He added that the member states and the EU institutions must use this positive momentum to complete the reform of the European Economic and Monetary Union.

 

He argued that “not all legacies from the past could be corrected automatically; we have seen greater social and economic divergences developed in a number of member states”.

 

He concluded that “it was essential that our work going forward contributing to the real and sustained convergence of our economies”. 


Measures performed…

Both the EU institutions and the member states took strong political decisions to contain the crisis, preserve the integrity of the euro and to avoid worse possible outcomes.

 

The EU has worked in the following directions:

 

= to regulate the financial sector and improve economic governance;

= to bolster new and common institutional and legal frameworks;

= to establish a financial firewall for the euro area;

= to support countries in financial distress;

= to improve the member states’ public finances;

= to pursue structural reforms and encourage investment;

= to combat youth unemployment;

= to improve banking sector supervision;

= to increase the ability of financial institutions to cope with future challenges; and

= to establish ways to manage and better prevent possible crises.

 

As a result of these actions, Europe's Economic and Monetary Union (EMU) has been significantly overhauled and the European economy – and notably, the euro area economy – is back in shape, said the Commission. The European recovery is sustained and unemployment is steadily going down. The number of EU states belonging to the euro has increased from 12 to 19 and the euro is now the second-most important currency in the world.

 

Presently, the EU economy is expanding for the fifth year in a row. Unemployment is at its lowest since 2008, banks are stronger, investment is picking up, and public finances are in better shape. Recent economic developments are encouraging but a lot remains to be done to overcome the legacy of the crisis years. The European Commission is fully mobilised to deliver on its agenda for jobs, growth and social fairness.

 

Out of the eight EU states that received financial assistance, only Greece is still under a recovery programme and is due to exit it in mid-2018. Only three EU member states are now subject to the corrective arm of the Stability and Growth Pact, the so-called Excessive Deficit Procedure, down from 24 EU states at the height of the crisis.

 

The Juncker Plan, or Investment Plan for Europe, launched in November 2014, is now set to trigger more than €225 billion across all EU member states.

 

However robust presently, the EMU remains incomplete and the journey of the euro has just started. From the Five Presidents' Report of June 2015 to the reflection paper on the Deepening of the Economic and Monetary Union of May 2017, a lot of initiatives were taken in recent years to draw the lessons from the crisis and prepare the EU even better for future challenges.

 

More information on the following websites: = Reflection Paper on Deepening the Economic and Monetary Union; = The Five Presidents' Report; = The White Paper on the Future of Europe; = Reflection paper on the social dimension of Europe; = Reflection paper on harnessing globalisation.

Main source: http://europa.eu/rapid/press-release_IP-17-2401_en.htm?locale=en

Latvian version: http://europa.eu/rapid/press-release_IP-17-2401_lv.htm






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