How can we forecast the crisis? What do the different forms of contemporary crisis in Europe tells us about it?
The term of Crisis comes from Greek’s language “krisis” and it means, in the general sense a choice, decision, and a struggle, or the struggle in which it is necessary to act under the pressure of time. Crisis extend the meaning of features such as urgency, trauma and subjective consequences of trauma in the form of negative experiences.
Humanity always had to deal with crises since the beginning of its entity.
They are triggered by random events, personal and life failures. Everybody’s life is marked by constant changes in the aftermath of critical events. We live in an environment where positive and negative values result in a state of internal unbalance.
Human behavior cannot be fully controlled and predicted. You cannot fully predict the action of nature forces, but we can limit the situations that trigger the crisis and minimize the consequences. However, they cannot be eliminated to the very end. Crisis is a special phenomenon, occurring within the general, sometimes very long process of change that is occurring around us.
Władysław Kopaliński defines “the crisis according to its Greek origin as a period of breakthrough, a solstice, a decisive turn, and a period of economic downturn”.
Ryszard Wróblewski defines “the crisis as a culmination of conflicts in various areas of social life. Conflicts are ubiquitous, inevitable, because they are in the structure of society. Crisis means the development of internal or external events that poses a direct threat to the vital interests of society and follows so quickly that they force the political authorities to immediately take extraordinary action”.
Types of crisis in Europe
Economic crisis in other words is a recession, economic withdrawal or economic depression which is often colloquially and simply referred to as a collapse.
This phenomenon is seen mainly in the fields of economy, based on the economic meltdown caused by external factors. The reason may be economic disaster badly managed financial policy or economic policy of the state, and thus, the Convention are gaps in the budget of the country. At the time of such economic or economic disequilibrium comes to the number of bankruptcies of major institutions, companies, banks and most large companies. The consequence are layoffs, job losses, as well as redundancies and then there is a significant deterioration of the country’s economy.
Financial crisis a situation in which the power of it financial institutions or wealth’s might drop very quickly. A financial crisis relate with a stampede or a run on the banks, in which investors try to sell off assets or retract money from savings accounts with the anticipation that the value of those assets will drop if they remain at a financial establishment.
A financial crisis might stick out as a result of institutions or wealth’s being overrate and it might be sharpen by irrational investor behavior. A string of instant further top selloffs can result in lower capital prices or more savings recall. If it’s left irresistible, crisis might cause the economy to go into recession or on the other hand depression
Migration crisis means motions of dwellers of country or region. The causes of migration are economic, or political like (wars, dislocation, political oppression).
Migration processes are the types that if they take on a mass character, can cause socio-political problems and conflicts. Immigration countries therefore face barriers to uncontrolled influx of foreign population.
Political crisis destabilize social,economic and political life in the state, and it’s negatively impact on social moods which they are often the cause of the frustration of society, or the radicalization of citizens that create social tension, which can find its escape eg in demonstrations, strikes or even street riots. They also significantly reduce the sense of security of people and undermine the confidence of social political cliques – they may have similar consequences with the addition of one more threat to the existence of organizational structures of the state. This is a very serious threat to the entire political-legal system, not to mention destabilizing almost every area of life. Sometimes political crises result in political upheavals – the situation of radicalization of society can be used by people with dictatorial views and ambitions, and sometimes even by political riots or internal conflicts, such as civil war.
Few examples of crisis in Europe
Economic crisis,
For many years, Europe has been trying to save Greece, which has been in an extremely severe crisis of public finances and the associated recession. The causes of this crisis lie, first and foremost, at a time when Greece was trying to enter the euro zone.
In order to get into the euro zone and accept the common currency, Greece had to meet strict criteria for inflation, public finance deficit or interest rates. These goals have been achieved, as we now know, with creative accounting, or colloquially-falsified statistics. For political reasons, the European Commission did not verify the Greek data as accurately as it should. Entering the euro zone gave Greece access to significantly lower public debt servicing costs. Financial markets, treating the euro zone as a single state, valued Greek bonds at levels similar like those of Germany. This has significantly facilitated Greece’s borrowing of debt and has allowed it to finance current consumption and non-taxable tax expenditures and debt relief.
This situation could only persist until there was no crisis in the financial markets. However, such a crisis has occurred and the interest rates on Greek bonds have risen sharply, contributing to the increase in the deficit and leading to a situation in which Greece was no longer able to pay its own debt.
In order to prevent a bankruptcy of the country, the Greek government started under the pressure of the other euro area countries to introduce a savings package. This meant a sharp reduction in public spending, among others. The release of thousands of redundant government officials whose ruling parties have hired to build political clients and support. In return for this, and the privatization plan for state-owned enterprises, euro area countries have promised financial support to Greece.
For now it allows Greece to survive, but sharp spending cuts have driven the country into a sharp recession, further reducing budget revenues. This means that Greece will not be able to cope without outside support and perhaps it will be necessary to reduce its debt. This would mean significant losses for financial institutions holding Greek bonds.
The problem of Greece is also low tax collection and the tradition of avoiding them by the Greeks. A significant portion of trade is done in the gray area, and thousands of properties are formally under construction, which avoids property taxes.
In conclusion, the causes of the Greek crisis lie in the carelessness with which successive Greek governments spend public money, not paying extra attention to tax collection. Combined with counterfeiting of statistics conducted with the help of rating agencies, this has led to the current situation.
Migration Crisis
Migration crisis in Europe also called the refugee crisis caused by the massive arrival of refugees and migrants to Europe, with countries outside Europe also facing the migration crisis. The beginning of the crisis is deemed to year 2015, but already increased the number of immigrants and refugees coming to Europe. The main countries from which refugees are skipping to Europe are Syria, Afghanistan and Iraq. The main causes of migration are the fierce fighting forced some 13 million Syrians to leave their homes, of which 4.8 million sought refuge outside Syria. The rise of the radical Islamic state is also the cause of massive migration from Arab countries, mainly religious minorities. One of the main causes of the migration crisis is not only the situation in Africa and the Middle East, but also the ill-considered EU migration policy of the past several years. The migration crisis has exposed one of the greatest weaknesses of the European Union, and the lack of a common migration policy. Nearly all the decisions taken in this area are the great differences between the leaders of the individual states.
Political crisis
Brexit- means in british exit ‘out’and it’s a common name for the process of leaving the UK structures of the European Union, initiated by a referendum in June 2016. There are many reasons that Britain’s people voted for leaving the EU and here are some of them. The main argument is the costs of membership of the Union In fact it’s 190 million pounds a week. The other area is the cost of being in the Union. Britain is privileged by the negotiations of Margaret Thatcher, but still has to pay. We can assume that as the Britons leave the EU they will not bear the costs. The second, given by the inhabitants of the Isles, is the reduction of immigration. The Britons complain that the people from the Union are taking their jobs. Brexit would limit this practice. Also Britain is not in the euro area and has its monetary policy. Going out will not have to subordinate its economy to EU ideas. Also the important thing is that the Britons did not want the regulations imposed by Brussels.
Two years is not enough for the overall definition of the new London-Union relationship that would probably be negotiated – after Brexit in another contract or agreement. It may take another 5-8 years. Brexit reduce the potential for the EU as a trading bloc, and thus reduce its bargaining power eg. In relations with China. The basis for Europe’s security is NATO, from which the British do not go, but Brexit will also undermine the geopolitical position of the EU.
How can we forecast the crisis?
Looking at the recent crises or currently ongoing it is hard to forecast them, but let’s look at some of the predictable solutions.
Although macroeconomic models are increasingly calibrated and more and more data is available, economists are not and will not be able to tell what will happen. People in decision-making and in predicting the future often ignore all objective data, and instead rely on their own preconceptions. In turn, their confidence in forecasts may increase when they receive information completely unrelated to the topic besides their evaluations may be twisted, for example, by stereotypes. One of the biggest problems in forecasting is that people overestimate their abilities in this area. The point here is that people are easily coming up with explanations of events or actions they could not have foreseen in the past – such as the behavior of stock exchange indices following the announcement of the results of the presidential election in the United States. This can be referred to as “post rationalism”, which can be harmful. Similarly, before the referendum on Britain’s departure from the European Union last June, economists predicted that, in the second half of 2016, the UK would face a severe slowdown in economic growth. However, it was different: the British economy was still developing well. One of the institutions that performs ex post evaluations of its forecasts is the International Monetary Fund (IMF). They indicated, among others. The reason why the IMF failed to predict the financial crisis that began in 2008 was the so-called. Group thinking. Not everyone is willing to “go out ahead”, anticipating the coming crisis. The problem with forecasts is also that few of them are constantly updated, so few forecasters are able to predict the turmoil in the financial markets.
In light of forecasts for faster economic growth and inflation in 2017, OMFIF believes there is a justified risk of a sharp rise in bond yields. In addition, positive investor sentiment for proposed US business-friendly changes may change when trade and economic protectionism is at the center of attention. Therefore, it should be borne in mind that the presently better and better economic forecasts can be revised very quickly.
To summarize however, if we fail to anticipate the crisis then it is worth to have a very well developed crisis management is the activity of public administration bodies. The element of guiding national security, which consists in prevention crisis situations, prepare to take control over them on the road and planned actions, response in the event of a crisis and restore the infrastructure or restore it to its original character.
Crisis management as an organizational and functional system is essential to properly ensure the safety of people in situations of danger Life, property and the environment and should cover all levels of management state. In the era of developing democracy one of the most important functions of the modern the state is to provide citizens with basic protection conditions against Potential and real dangers.
Bibliography
1. Financial Crises: Explanations, Types, and Implications Stijn Claessens and M. Ayhan Kose
2. https://www.nytimes.com/2016/05/04/business/international/european-commission spring-forecast-2016.html.
3. https://www.ft.com/content/63d8b354-ed5e-11e6-930f-061b01e23655?mhq5j=e2
4. https://pl.wikipedia.org/wiki/Kryzys_migracyjny_w_Europie
5. http://kryzys.planowanie.net.pl/co-to-jest-kryzys-i-skad-sie-bierze/
6. http://www.clausewitz.com/readings/Echevarria/APSTRAT1.htm
7. Notes from Strategic Studies class
Grzegorz Sawicki