Germany's Choice in Euro Crisis

1. Lack of Necessary Fiscal Consolidation and Monetary Policy Inflexibility

Entering the Eurozone, each country must meet the restriction of ECB, which debt of GDP% cannot exceed 60%. Some of the countries just take advantage of the leak of the policy of EU fiscal policy to conceal the real public financial balances. For example, Greece did so in 2001.In addition, monetary policy inflexibility makes members cannot devalue currency to balance their trade deficits, increase GDP and higher tax revenues in nominal terms.

2. Inefficient Government Management

Greece, a country with a deep belief of market economic mode, ignores the importance of governmental inspection. A similar situation exists in Spain government management, which unregulated savings banks in the real estate market. To be more specific, compared with U.K, market portion in Spain is not rational. Second, regional politicians take charge of these banks, not needed to disclose financial situation information. Banks usually loaned to undesirable clients before the crisis.

3. High Social Benefits and Public Expenditure

EU members are well known for its high level social benefits. The salary and labor productivity are not consistent. Due to the crisis, the situation becomes worse. Unemployment rate in every country increases historically high and in turn the public benefits increases, causing the government spending and debt skyrockets. Greece burden is bigger than other countries, since it has nearly 10% labor merged in government offices.

4. Tax Evasion Problem<3>

Before the crisis, EU members share the severe tax evasion problem. For instance, the gap between what Greek taxpayers owed the year 2010 and what they paid was about a third of total tax revenue, roughly the size of the country's