Comparison Between The Eurozone And The UK
Each government has a different “tool” to control its economy. Those are the Fiscal policy and its “sister theory” the Monetary policy. Within the Eurozone, there is a centralized monetary policy and member states are not allowed to derive from it. The UK, however, is a different story. But before looking into the Eurozone and the UK cases, lets look into the two main economy controlling “tools” of every state.
The fiscal policy is a government policy, which affects tax rates, interest rates, and government spending in an effort to control the economy. In the fiscal policy we have to focus on volume of government total spending versus total tax revenue collected by government. In this logic government spending could be more than taxation
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It was almost 10% in 2010, but as previously mentioned the rising unemployment rate is a side effect of such a monetary policy. In 2013, the Eurozone recorder an unemployment rate of 12.1%. Since that, however, the rate has been dropping to reach todays levels of bellow 10%.
All this information confirms the contractionary monetary policy, which the Eurozone follows since the crisis began. The inflation stays low, but the growth rate is negative and the unemployment is high and rising in the years of crisis. The today’s data, however, shows stabilization of the Eurozone’s economy, proving this policy is working!
The Monetary Policy Committee (MPC) of the Bank of England sets United Kingdom’s monetary policy. The MPC is independent in setting interest rates, but has to try and meet the government’s inflation target. But, not like the ECB, the United Kingdom focuses on economic growth and unemployment. UK’s government is trying to stimulate consumption and investments by providing injections and supplying more money in order to lower the interest rates. The government is supplying more money by “printing” money. This is a process known as quantitative easing. The central bank (Bank of England) is buying financial assets in order to inject more money in the
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