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Some the schemes used to solve Latin America Debt Crisis of the 1980s can be use to the current EU Crisis - Essay Example

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Some the schemes used to solve Latin America Debt Crisis of the 1980s can be use to the current EU Crisis

The schemes devised are effective in solving the crisis that is facing the European Union. This is because the challenges of the EU are similar to those affecting countries in Latin America in the eighties. Solving the current EU crisis The Baker plan and the Brady plan can solve the present economic crisis in Europe because they focus on growth of the economy. Countries in Latin America succeeded in solving their debt crisis in 1980s using the two schemes. According to research by economists in Europe, the Brady plan is more effective because it emphasizes on debt reduction. In Mexico, investors’ debts were cleared using the guidelines of the plan (Habermas & Ciaran 107). Interestingly, the Brady plan and the Baker plan are approaches that America use when handling financial crisis for the developing countries. The two plans advocate for sound economic policies when enhancing growth. According to Habermas, & Ciaran (14), the strategy should target least developed economies. The Baker plan identified the countries that needed aid before formulating policies that restructure the economy. This is an indication that European countries should classify their economies before coming up with corrective measures. According to the plan, extending governments should extend the maturity period for loans for countries such as Greece. This will cushion the citizens from crisis. Member countries in the European Union will have to restructure their financial system to improve the economy. The plan equally advocates for intervention by the IMF in aiding ailing economies. IMF should increase lending to commercial banks. Additionally, developed countries should voluntarily reduce debts for ailing economies. The EU government should seek support from Asian economies in creating a balance. For example, the government can encourage the swapping of bonds with creditors from China. This is preferable in the case of Greece. According to Habermas, & Ciaran (2), Latin America received support from Japan in averting their financial crisis. Although the strategy worked in Latin America, it is difficult to estimate the magnitude of a crisis using previous explanations. However, this does not mean that the approach used in Latin America in the 80 will fail in Europe. According to the Baker plan, countries should strive to sustain the growth of their economies independently. Consequently, governments in Europe should encourage investments in the private sector to boost growth in the domestic market. Subsequently, trade regulatory institutions within the EU should introduce price control measures for consumer commodities. This will help cushion households from the effects of inflation. Governments should encourage investments within nations that trade within the EU block. This is because the liberalization of trade at the different levels of the economy creates a balance in deficit for countries (Brauch 8). Stable economies such as Germany and France should lend on behalf of ailing economies. This would reduce deficit for ailing countries within the EU trading block. This means that countries cannot restructure economies without seeking assistance of international agencies. Since, the Bakers plan advocates for debt acquisition to the interest of the nation, countries should consult expert economists before making decisions on economic issues. Additionally, least developed countries within the EU, should also seek support from the World Bank instead of the IMF. Equal participation of ...Show more

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Name: Institution: Task: Date: Some of the "schemes" used to solve Latin America Debt Crisis of the 1980s can be use to the current EU Crisis Countries use a combination of strategies when handling crises. The most common stratagems used are the Baker plan, the Brady plan and the debt forgiveness…
Author : wolfcoralie
Some the schemes used to solve Latin America Debt Crisis of the 1980s can be use to the current EU Crisis essay example
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