ECON396 assignment

There are several factors why the southern EU countries have performed relatively poor than the northern ones. One of them is that prices rose far faster in the peripheral countries like Greece, Spain, and Portugal. In Greece, for example, prices between 2000 and 2007 rose by eight percentage points, and for Spain it was seven points. Since the peripheral euro-zone countries had far higher inflation rates than the core nations, they also had far lower real interest rates. It was a direct result of the euro and the policies of the European Central Bank (Olsson, S., 2009). And resulted in huge trade deficit gapes that were evened out between countries through the banking system.

Some of the states may be highly centralized, whilst others are extensively decentralized. Advantages of decentralized states is that many powers have been delegated from ministers to agencies, and local governments. In this type of state organization the decision-making authority is being delegated to local governments which have more expertise in working with specific regions. In decentralized states different entities are likely to want and to be able to go in different directions, and one approach can be tried in one state or at one level. Another possible contrast concerns the focus of the reforms. Central governments in centralized states tend to be more heavily involved in the sphere of service delivery (education or healthcare) than do the central governments of decentralized states (Zajda, J., 2006).

Several causes led to economic decline in Great Britain. It is a global economic slump of a major trading partners such as the countries of EU with 60 percent total share of UK trade and the United States (Astley, M. et al., 2009). Also a credit crunch when financial institutions cut back the amount of credit they have prepared to lend to households and businesses and rose the interest rate on these loans. And higher crude oil and gas prices that led to increased input costs, driving inflation higher and causing a fall in real incomes for households and a fall in profits for businesses.

References

Astley, M., Giese, J., Hume, M., & Kubelec, C., 2009. Global imbalances and the financial crisis. Bank of England Quarterly Bulletin, 2009Q3.

Olsson, S., 2009. Crisis Management in the European Union: Cooperation in the Face of Emergencies. New-York: Springer-Berlin Heidelberg.

Zajda, J., 2006. Decentralisation and Privatisation in Education: The Role of the State. New-York: Springer-Berlin Heidelberg.

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