The Eurozone: Effects on Spain After the Implementation of the Euro

Rohde-Moe, Caroline Mürer (2014) The Eurozone: Effects on Spain After the Implementation of the Euro. Undergraduate thesis, under the direction of Joshua Hendrickson from Economics, The University of Mississippi.

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Abstract

This thesis examines the current situation in the Eurozone and how the entry into the currency union has affected the member countries. I have especially focused on the consequences the implementation of the euro has had on Spain because of the deeper recession that this country has experienced compared to many of the other Eurozone countries. I wanted to figure out what has caused some nations to struggle at a different level than others. By comparing Spain to countries such as Germany, United Kingdom, and France I have tried to look into how much of the domestic problems seen in the Eurozone are the result of the common monetary policy and how much is due to country-specific issues. The paper briefly describes currency unions where the relatively short-lived Eurozone currency union is compared to the American currency union using the dollar. Furthermore, the Eurozone financial crisis of 2008 is discussed and how the period right after the crisis has been crucial for the countries that today are finding themselves encountering economic difficulties. The data that has been gathered for this paper comes from examining previous journals and researching various Internet sources. The findings illustrate that the problems that many of the nations in the Eurozone have encountered are a mix of the imposed monetary policy that the countries were obligated to follow when entering the currency union, and country- specific issues. To explore these indicators further, statistical data such as the unemployment rate, debt to GDP ratio, and inflation rates were examined. Spain’s unemployment rate is currently extremely high, and I found that it has diverged from many of the other countries in the Eurozone since the financial crisis of 2008. This problem has risen from for example the country’s employment protection legislation, strong protection of permanent workers, and high share of temporary workers. My findings for Spain illustrate that the problem has been a mix between the common Eurozone monetary policy and Spain’s employment protection legislation policy.

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