Influence of Greece Debt Crisis on Overall Balance of Payments in The Essay

Influence of Greece Debt Crisis on Overall Balance of Payments in The EU - Essay Example This paper describes the influence that Greece debt crisis had on European monetary policy. The overall monetary policy of the EU has been modified. The Greece crisis had affected the demand of money in the region. The issue of balance of payment usually involved the goods and workers movement across all member states this come with the abolishing of tariffs between member countries. They included transport of goods between countries; people working along the countries had the flexibility of working along the countries without any limitations. For the case of Greece the European Union found a sense of imbalance and there was need of invention. As requested the EU suggested measures and action. The measures were taken to ensure a balance of payment. It engaged in a semiannual strategy. This was to close the deficit to 3 per cent since there was an assumption that the deficit of GDP in 2010 was 4.2 per cent. There was need to revise the figure given by the Greece authorities the figures had changed and need revise them, in a bid to ensure balance. As much as there it was a collective role of the region in controlling the foreign exchange, it advice the Greece government to ensure that it sells its reserved to ensure a balance in the foreign exchange holdings. This in term ensured the balance of payment of the region’s currency this was to ensure an equal equivalent capital inflow. The balance of payment is not only a one state affair but it involves the entire continent and the world as a whole. ... 45). For the case of Greece the European Union found a sense of imbalance and there was need of invention. The EU through the European commission contemplated on measures to undertake. As request the EU suggested measures and action. The measures were taken to ensure a balance of payment. It engaged in a semiannual strategy. This was to close the deficit to 3 per cent since there was an assumption that the deficit of GDP in 2010 was 4.2 per cent. There was need to revise the figure given by the Greece authorities the figures had changed and need revise them, in a bid to ensure balance (Jonung, Martin and Jonas, 2008, p. 34). As much as there it was a collective role of the region in controlling the foreign exchange, it advice the Greece government to ensure that it sells its reserved to ensure a balance in the foreign exchange holdings. This in term ensured the balance of payment of the region’s currency this was to ensure an equal equivalent capital inflow. Thus a surplus in the economy was been experienced in that there was to be an increase in the imports and hence forcing the Bop in an equilibrium. Risks where on the rise in Greece and the rate was described as dramatic, government bonds and the increasing awareness and securities. There was need to safe guard the effects of financial effect in the entire euro zone. There was doubt that Greece will pay all its debt including the accrued debts without affecting its economy or there was also a doubt whether they were in opposition to pay the debts at all. The debate continued till the beginning of May in 2010 when the matter was not only a debate but the reality. There was need of intervention and on May second it requested for

Foreign Exchange Risk Essay Example | Topics and Well Written Essays - 1500 words - 1

Foreign Exchange Risk - Essay Example Exporting and importing also implies considerable foreign exchange risks for the companies involved. Importers will have to pay a higher price if their home currency depreciates against the exporting foreign country and vice versa. International retailing operations also entail high exposure to foreign exchange risk as the exchange rate of any of the two countries fluctuates. The fluctuations in exchange rate â€Å"†¦result in direct changes in the relative prices of domestic and foreign goods†¦Ã¢â‚¬  (Bartov and Bodnar, 1994, p. 1758) It ultimately increases the exposure of virtually all forms of international operations to foreign exchange risk. Foreign exchange or currency risk affects a company in several different ways viz. sales level, future cash flows, financial reporting, product price and production etc. Bartov and Bodnar propound that exchange rate fluctuations â€Å"†¦influence both the current and future expected cash flows of firms with international operations.† (1994, p. 1758). Fluctuation in exchange rate can affect a company’s future cash flows by increasing or decreasing the price of goods and services in the domestic or foreign country. It can also affect a company’s operational performance by increasing or decreasing the cost of importing raw material. Currency rates have a significant impact on the reporting of sales level. If the foreign exchange rates are favourable, the company’s reported sales will rise (Bartov and Bodnar, 1994). Therefore, apart from affecting its real future cash flows, exchange rate fluctuations bear the capacity to influence its reported revenues. Exposure to foreign exchange risk can also affect a company’s production level and its prices. It will be costlier for companies to import products from a foreign country having a high exchange rate as compared to the domestic