THE ROLE OF EUROZONE DURING THE CORONAVIRUS CRISIS
Introduction
Eurozone is a monetary union of some European member states that have adopted the use of euro as their legit and currency that can be used in the transaction of legal tender. Monetary authority of the euro area is the euro system; this is yet to be embraced and implemented by other states who are still using their currency once they meet the requirements to do so. Eurozone has been able to boost and maintain a high level of the economy as compared to other unions and states, this was revealed in the year 2017.
Section 1
Coronavirus crisis is the most recent and tragic pandemic has posed a lot of concerns and destruction of the world economy, in all part of the world its effect is seen and realization of it significant impact to the various economy is felt. It has caused a lot of drawbacks, and to make this reality unemployment rate has been noticed and Eurozone is trying its best through the relevant monetary policies to ensure this is brought to a standstill. That economy of these particular states is stabilized. In responding to the crisis, Eurozone has experienced certain types of unemployment, i.e.
Cyclical unemployment
This happens when there are suspected economic drawbacks, the companies tend to hire and employ few workers, and as a result, the jobless rate shoots higher than. This is a companion by some scenario of firing or suspending other workers so and when this happens
Frictional unemployment
This type of unemployment happens when there is a shift between career and educational demand. It’s associated with the following; employees moving from one area to another to look for new jobs or when one decides to continue with academics and later searches for the job. Or when new graduates are looking for employment after they are done with the academics.
Regional unemployment
This majorly concerns the regional and different sectors like some specific and area eh industrial sector or tourism sectors. When there are will demand some services offered at the sectors, it means people will lose their jobs. The most affected institutions are the manufacturing, food industries and the administration; they are the most affected since they involve one interaction of people.
Structural employment
Job skills determine where and when to work and who to work for, this type of unemployment occurs when some specific skills are required to replace the existing skills. That’s when workers are replaced to create a vacancy for new skills
During this period of covid-19 crisis, regional unemployment remains the target as most of the sectors are affected. Tourism and food services are affected, and this has created unemployment to some extent. This remains the focus of Eurozone to mitigate this crisis when targeting and focusing on this. Through their monetary policies, addressing this crisis should be much focused and smart in terms of priority.
Despite its accuracy and relevance in economic stabilization, this measures poses various effects that are both positive and negative. For the Eurozone to correctly mitigate coronavirus crisis, it must address this regional unemployment that is caused by sectoral economic imbalance and fluctuation of the market.
Effects of this measure are; recovery of the economic loss, the affected sectors are significant contributors in the national economy. Increase of employment rate, addressing this issue under this measure, automatically ensures job security and employment to many people. Excellent and proper utilization of natural resources; this includes the superb usage of the skills that are required in a particular area. This will ensure the recovery of the economic losses that have been experienced in the euro areas. This will be possible only when the appropriate and reliable monetary policies are put in place and under full utilization of the available techniques and skills.
Section 2
In Eurozone, the monetary policy is one the critical and main agenda of these unions; therefore, European central bank and other institutions are having the responsibility to oversee it. It’s monitored and controlled by a committee that consisted of the appointed members who will represent the interest of the member states; they are equal in number to bring the issue of transparency and equality.
Being that fiscal policy has a lot of impacts in the economic growth, stability of macroeconomics and inflation of the associated member states that are coming together to form Eurozone, it’s recommended that fiscal discipline be upheld. The institution responsible for all this is the European Central Bank (ECB). This is attached to the reason that, the solemn and primary purpose of ECB is to control in inflation and the inflation or the rise in prices of commodities is greatly attached to the fiscal policy. Overall survey and of the activities of the monetary policies remains the responsibility of the ECB and even the provision of liquidity when necessary.
There is importance incurred and realized when the European Central Bank controls inflation. This comes when ECB can adhere to its inflation targets of below but close to 2%. It helps the member countries to balance the demand and supply of the resources that contribute to economic balance and realizations. When there is a careful balance of the aggregate demand and aggregate supply, controlling inflation will ensure there is prices stability in the economic market. Another reason valid as to why ECB should control inflation, this will increase the value of money.
Aggregate demand is the total demand for final products and the good of an economy at a given specific period. In other words, it’s the demand for the GDP of a country.
Aggregate supply is the domestic supply of products and goods is scheduled to sell to specific markets in a given period; example, an increasing rise in demands that firms and companies cannot facilitate and initiate production as quickly as possible.
Section 3
In response to the Coronavirus crisis, Eurozone has laid a reliable and promising response in line with fiscal and monetary policies. These are two policies that are majorly directed to the importance and stabilization of the macroeconomics. Monetary policy involves money supply and interest rate while fiscal policy is all about proper management of taxes and stabilizing supply and demand through controlling inflation. To mitigate the coronavirus crisis; the following are implemented; supply and demand for essential products and services. The basic and essential function should be made available to prevent a shortage that can result in aggregate demand. Through this, regardless of the intensity of this pandemic, people will be able to carry out business as usual and economic standards and level upheld.
Another policy of domestic financial circuit in local currency is essential and relevant in this time of covid 19. The value of money is to be maintained; this will ensure the proper and supported flow of come and this demands for a new monetary intervention.
In the time of a crisis, two extreme examples of fiscal policy are applicable to ensure that there are effects on aggregate demand. The policies are tax cut and increased government spending. An increment in aggregate demand is noticed when the two policies are put in place. Negative effects are noticed when the fiscal policies are put in place are as follows, increased debt that can mount to weak recovery. Nevertheless, positives effects out ways adverse effects, raising more revenue and reduction of public spending as well as lowering the budget deficits are some of the right parts of the above mentioned and policies
Section 4
There is a projected fall in international trade caused by coronavirus crisis; this is predicted to affect all part of the world, including Eurozone. This has been seen in through drastic fall in the prices of oil and other essential commodities brought by recession and lockdown as a result of coronavirus. But in the better side of the side ECB launched a €750 billion pandemic emergency purchase program. This expected to work best and during this crisis.
Conclusion.
In conclusion, the remains the responsibility of the European Central Bank to ensure economic stability during this period of the pandemic. Life must continue; therefore, the earlier, the better.
References
ADLER, D. and ROOS, J.E., 2020. If coronavirus sinks the Eurozone, the’frugal four’ will be to blame.
Thirlwall, A.P., 1969. TYPES OF UNEMPLOYMENT: WITH SPECIAL REFERENCE TO ‘NON-DEMAND-EFICIENT’UNEMPLOYMENT IN GREAT BRITAIN 1. Scottish Journal of Political Economy, 16(3), pp.20-49.
Eijffinger, S.C. and De Haan, J., 2000. European monetary and fiscal policy (No. a056022b-c6b1-4c89-bcd5-309377a399aa). Tilburg University, School of Economics and Management.