Essay on Economic impacts of Euromarkets and other offshore markets on global financial market Cambodian Economist Journal, Vol.

1, Issue: 003 LONG KimKhorn, PUC, MA. IRs, ID: 61283 January 18th, 2013 Before we are going to discuss the economic impacts of Euromarkets and other offshore markets on global financial market, let me try to explain the definition of key terms including economic impacts, offshore markets, and global financial market. Base on businessdictionary.com, economic impacts mean macroeconomic effects on commerce, employment, or incomes produced by a decision, event, or policy. Accordingly to investopedia.com, Euromarkets is the market that includes all the 27 European Union member countries - many of which use the same currency, the euro. All tariffs between Euromarkets member countries have been abolished, and import duties from all nonmember countries have been fixed for all of the member countries. The Euromarkets also has one central bank for all of the member countries, the European Central Bank (ECB).Offshore markets are the markets located or based outside of one's national boundaries. The term offshore is used to describe foreign banks, corporations, investments and deposits. A company may legitimately move offshore for the purpose of tax avoidance or to enjoy relaxed regulations.

Furthermore, typically in economic, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transactions between them. The term "market" is sometimes used for what are more strictly exchanges, organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (like the NYSE, BSE, NSE) or an electronic system (like NASDAQ). Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell stock from the one to the other without using an exchange. Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, similar to stock exchanges. Financial markets can be domestic or they can be international.

Now let us take a look on the prospects for the world economy in 2012-2013. In 2011, United Nations stated that following the past two years of unrest and uneven recovery from the global financial crisis, the world economy is streaming on the brink of another major downturn. Output growth has already slowed considerably during 2011, especially in the developed countries. Growth is far from sufficient to deal with the continued high rate of unemployment in most developed countries and will drag down income growth in developing economies. Renewed global downturn is looming seriously because of persistent weaknesses in the major developed economies related to problems left unresolved in the aftermath of the Great Recession of 2008-2009.

Go back a little bit to see what happened in five decades ago in European Union, Eurocurrency markets began to develop in the 1950s and grew most spectacularly in the 1960sand 1970s. Since the mid-1960s, the growth rate of Euro-deposits has been more than double that of the world money supply (Podolski, 1986). This is the empirical data showing the great purchasing power of EU not just even in its territory but around the globe, especially, with the two superpower countries United States and China. So what was happened to offshore and global financial markets when Euromarkets met the sovereign debt crises in the euro zone? Well, according to United Nations in 2011, the sovereign debt crises in a number of European countries worsened in the second half of 2011 and aggravated the weaknesses in the balance sheets of banks sitting on related assets. Even bold steps by the Governments of the euro area countries to reach an orderly sovereign debt workout for Greece were met with continued financial market turbulence and heightened concerns of debt default in some of the larger economies in the euro zone, Italy in particular.

The fiscal austerity measures taken in response are further weakening growth and employment prospects, making fiscal adjustment and the repair of financial sector balance sheets all the more challenging. The United States economy is also facing persistent high unemployment, shaken consumer and business confidence, and financial sector fragility. The European Union (EU) and the United States of America form the two largest economies in the world, and they are deeply intertwined. Their problems could easily feed into each other and spread to another global recession. Developing countries, which had rebounded strongly from the global recession of 2009, would be hit through trade and financial channels. The financial turmoil following the August

2011 political wrangling in the United States regarding the debt ceiling and the deepening of the euro zone debt crisis also caused a contagious sell-off in equity markets in several major developing countries, leading to sudden withdrawals of capital and pressure on their currencies.

So if United States and European Unions is the major economic pole, why the tension of economic crises in EU was not cooled down. Well, weve seen many meetings within Euro family as well as with USA but just the talks is not make sense to deal with Euro crises because political division among EU member States, especially Germany and United Kingdom, over how to tackle these problems are impeding needed, much stronger policy action, further eroding the already shattered confidence of business and consumers. Such divides have also complicated international policy coordination. Nonetheless, as the problems are deeply intertwined, the only way for policymakers to save the global economy from falling into a dangerous downward spiral is to take concerted action, giving greater priority to revitalizing the recovery in output and employment in the short run in order to pave more solid ground for enacting the structural reforms required for sustainable and balanced growth over the medium and long run.

The other reason of unease because some of the fears surrounding the UK economy have eased to a degree since the start of 2012, but given ongoing uncertainties in the Euro zone, the country has resigned itself to a period of low economic growth. With the latest official statistics indicating the economy contracted by -0.3% in Q1 2012, and with output having fallen by -0.4% in the previous quarter, the UK is currently considered to be in a technical recession. While economic activity is likely to flat-line in quarter two, as an additional bank holiday impacts on output, growth should resume in the second half of the year bolstered by the Olympic Games and into 2013. Even though the UK economic activities stay a bit far better but, as to be expected, the current economic uncertainty is having a negative impact on the performance of UK commercial property (CUSHMAN & WAKEFIELD, 2012).

Furthermore, we should not forget that China is also the big partner of EU in term of economic cooperation and trade exchanges because there are several member States in EU are the competitive market of Chinas exports. According to European Parliament,

2011, even though after 35-year of economic relations between EU and China the questioning on whether China is miracle or threat for European Unions still debatable. However, what weve have known China is at the core of every economic conversation and more than ever before perceived as the strategically important market because 78% of businesses surveyed in a very recent EU Chamber of Commerce study report an increase in revenue over last year, whilst 71% report an increase in net profit depending on Chinas imports and exports. Ten years after Beijings accession to the World Trade Organization (WTO), this raises a number of crucial issues about EU companies market access capacities and, in the long run, the attractiveness of a Chinese market that is perceived as both strategic and difficult to penetrate. EU policy makers are well aware of this complex situation and the need to better balance the EU-China trade and economic relations for a sustainable economic growth and strategic partnership. But beyond official discourses and apparent activism, EU policies still suffer from a lack of coordination and clarity due to insufficient political unity and will.

In conclusion, European Central Bank, 2010, described that before the crisis, the Euro region was experiencing an economic boom with rapid GDP and credit growth, which in turn was driven by large capital inows and beneted from strong global growth and easy global liquidity conditions. In addition, strong economic growth in the region was supported by positive expectations of EU convergence and euro adoption. But upto the nal quarter of 2008, EU showed remarkable resilience to the global economic and nancial crisis. This is partly due to the fact that the region had no or only negligible exposures to subprime or subprime-related assets. Part of this resilience can be explained with standard vulnerability indicators as well, which at the onset of the crisis indicated in several dimensions a strong position of the region compared with previous crises. The main exceptions were the heightened external and banking vulnerabilities, precisely two areas that proved to be very sensitive in the context of the global crisis. So failure or triumph of Euromarkets is the considerable concerns not just for developed economies but for developing countries as well.