Plights of the Euro-Zone

According to the Wall Street Journal, decreasing exports, diminished business profits, and low consumer confidence are acting to worsen the euro-zone debt crisis. The decrease in exports can likely be attributed to decreasing demand across Europe and the rest of the world as consumer confidence sinks. This can be linked to the principal of changing expectations shift the demand curve. Currently, as consumers across the globe anticipate the crisis will worsen, they become less willing to spend their money. Despite Europe’s woes, the article notes one nation’s current economic uptake. Contrary to overwhelming decreases in consumer confidence, the opposite has occurred in Italy reflecting enthusiasm and optimism in the appointment of a new leader, Mario Monti following the resignation of unpopular Silvio Berlusconi. Overall, however, the reduction of money in the economy compounds the problems of the Euro Zone, as governments tax revenue decreases. Further, WSJ notes the decreasing demand for Europe’s products decreases the willingness of companies to hire workers, due to perceived high opportunity cost of hiring at the present. The diminished business profits mentioned by the WSJ also threatens to exacerbate the troubles of the Euro Zone, as “an expected slow-down in future activity” may prompt firms to temporarily shut down and adjust variable costs in an attempt to save themselves by adjusting variable costs.