Denmark

Europe's Financial Troubles Worry Neighbors

The European Central Bank looms large over the Euro debt crisis. Photo: <a href="http://www.flickr.com/photos/soumit/928182271/">soumit (flickr)</a>
The European Central Bank looms large over the Euro debt crisis. Photo: soumit (flickr)

As Europe attempts to thwart a broader global recession, it is facing what many economists refer to as a trilemma, and poorer countries could be the victims.

A financial trilemma is comprised of three goals that policy makers try to achieve: (1) a stable/fixed exchange rate; (2) an economy open to international flows of capital; and (3) a sound monetary policy to stabilize the economy.

Here's the catch: In reality you can only achieve two of these goals, not all three.

In 1999, the Eurozone decided to give up the third goal, independent monetary policy. In exchange, they enjoy a common currency across 17 member nations and the freedom to exchange money and goods across borders. Though the European Central Bank creates monetary and fiscal policy for the European Union, each member nation relinquishes its own control.

This becomes an issue when a country gets into financial trouble and must defer to the European Central Bank or greater European Union. This was recently evidenced with the bailout and continuing debt problems in Greece.

Potential for problems arise due to our ever globalized, interconnected world. Eurozone policies are far-reaching, extending their grasp to neighboring emerging markets dependent on foreign dollars. With austerity measures becoming the norm, lenders are avoiding risk and could cut foreign lending in favor of keeping business in their own backyard. The Economist references a speech by the Financial Stability Board head, Mark Carney, in which he warned about the damage if the European bank were to deleverage on the world economy.

Many emerging economies in Eastern Europe depend on both foreign aid and outside investment. If the Eurozone's financial well runs dry the effect will ripple throughout Eastern Europe, even the U.S. Poorer E.U. members worry that they'll emerge the victims. French president Nicolas Sarkozy rocked the political world after his comments at a University of Strasbourg debate on November 8, where he described a proposal for a two-speed Europe, presumably divided between richer and poorer nations.

What part does the European Central Bank (ECB) play in this? That’s the question everyone is asking. Similar to the U.S. Federal Reserve, the ECB has the power and leverage to swoop in and bail out E.U. members on the brink of collapse. They are hesitating, however. Germany feels the ECB should step in only as a last resort. Many policymakers in Germany believe that the current crisis is forcing reform and thus serving a purpose, as recently expressed in The New York Times.

With optimism waning on debt solutions for the U.S. and abroad, tensions mount and consensus becomes imperative. Politics need to be set aside before any sort of real dialogue can exist. Will the E.U. decide on a two-speed Europe? Will any countries abandon the Euro? The implications for emerging markets are considerable; several outcomes could result in global recession.

A Climate of Displaced People

A man delivers his goods through a flooded street in Mumbai, India. Photo: <a href="http://www.flickr.com/photos/hussain_quantum/3698717526/">Hussain_Quantum (flickr)</a>
A man delivers his goods through a flooded street in Mumbai, India. Photo: Hussain_Quantum (flickr)

It should be no surprise that armed conflicts force millions of people from their homes each year. In fact, 4.6 million people were displaced by conflict and war in 2008. But I was shocked to learn that the number of people displaced by climate change is four-times greater than those displaced by conflict. That's about 20 million people — roughly the population of Australia — that have been forced to relocate because of natural disasters like flooding, earthquakes and storms.

This figure comes from a joint study by the United Nations Office for the Coordination of Humanitarian Affairs and the Internal Displacement Monitoring Centre and is the first large-scale look at how climate change is effecting human populations. It provides data on exactly how carbon emissions have affected human lives, and it offers a somewhat harsh glimpse into what will happen if the situation is left unchecked.

Real Time Refugee Reunification

Topics: Humanitarian Aid
Countries: Denmark

War. Famine. Persecution. These are some of the ways thousands of families flee their countries each year and get separated in the process. So how do they reconnect?

Until now, their best bet was to seek help from the the Red Cross. Refugees submit an application to their local Red Cross office, which is disseminated to field workers from the charity's Geneva headquarters. Field workers attempt to find the missing family members using the information provided. A lot of people have been reunited this way, but the process can be lengthy.

Danish brothers Christopher and David Mikkelsen thought there had to be a better way, one that cut out the middleman. Inspired by social-networking sites like Myspace and Facebook, they came up with the idea for Refugees United. To get started, users just register and start searching in one of more than 20 languages.

One of the biggest hurdles Refugees United must overcome is the limited Internet access in rural areas and refugee camps. The Mikkelsens hope to solicit donations of computers for refugee camps and build a website that can be viewed on basic mobile phone platforms.

Hundreds of refugees have signed up so far, a number that would be hardly noticeable to social networking giants. But to the Mikkelsens, the number is encouraging. "If we can just unite that number of people," Christopher says, "we would be a great success."


Stories We're Watching

As Growth Slows, India Awakens to Need for Foreign Investment

International Herald Tribune - Tue, 02/07/2012 - 21:27
India’s central bank and economic analysts predict that growth will fall sharply to 7 percent this fiscal year and remain sluggish.

Social responsibility and a new world order

Washington Post - Innovations - Tue, 02/07/2012 - 07:56
Just before the New Year, the London-based Center for Economics and Business Research announced that Brazil had overtaken the United Kingdom as the world’s sixth largest economy. Furthermore, it predicted that by 2020, India and Russia will also have overtaken all the European economic powers.

Aid for trade policy rears its ugly head

The Guardian's Poverty Matters - Mon, 02/06/2012 - 01:41
The UK government's dismay at not being granted the contract for Typhoon fighter jets in India is an indication that its controversial aid for trade policy is still very much alive.

Liberia's battle to put the lights back on

The Guardian's Poverty Matters - Sun, 02/05/2012 - 23:00
Ellen Johnson Sirleaf has set ambitious targets to restore the country's electricity supply. But will it meet them by 2015?

As Africa's consumers rise, so does inequality

Yale Global Online - Fri, 02/03/2012 - 10:17
Kenya struggles to spread the wealth from rapid growth.

Recent comments

Countries

An initiative of Mercy Corps
“You must be the change
you wish to see in the world”
Mahatma Gandhi
Learn more about Mercy Corps >

Efficiency

Over the last five years, more than 89% of Mercy Corps' resources have been allocated directly to programs

Excellence

America's premier charity evaluator gives Mercy Corps four stars in organizational efficiency. Click here to learn more.

High Value

Every dollar you donate to Mercy Corps helps us secure $11.16 in donated food and other critical supplies.

Mercy Corps — Dept. W — 45 SW Ankeny — Portland, OR 97204
All original content Copyright © 2009 Mercy Corps. Quoted and linked content is property of the creator(s). Mercy Corps will not sell, rent or trade your personal information.