The Euro-zone Crisis

The three FDI theories chosen are product cycle theory, internalization and the OLI paradigm. According to Hemer's market imperfection and monopolistic theory of theory, Vernon (1979) argues that "innovation of consumer goods and industrial products can explain corporate international investment" (Vernon, 1979). Vernon (1979) insists that the production cycle can be divided into four stages: innovation, growth, maturity, and decline (Vernon, 1979). In the first phase of the production cycle, manufacturers gain advantages by possessing new technologies, and technologies are becoming known as products are developed (Lancaster & Wesenlund, 1984).

In the past two years, the euro area has experienced frustrating controversy about the crisis management of the area now called the "euro zone crisis". The crisis began in Greece, Ireland, Portugal, Spain and recently spread to Italy. The ratings of sovereign bonds in these eurozone countries have been downgraded and concerns about financial defaults and borrowing costs are rising rapidly. The progress of these problems continues to threaten the economies of other euro area countries and ultimately continues to threaten the future of the euro.

Given the name "crisis in Europe", it does not mean that the current crisis in the euro area is limited to the euro area. The euro area has exerted enormous economic impact on a global scale and the regularity of the crisis spreading in each euro area suggests the importance of how it deals with this problem. Crisis exists not only as a result of sovereign debt and bank finance problems but also in the real economy of structural problems. The euro area needs to change financial and fiscal policy and how to manage the financial system.

Like the United States, the financial crisis is spreading throughout the European economy. Germany's economic output is the largest in Europe, with 0.4% annual reduction in the second quarter and 0.5% in the third quarter. Production in the euro area 15 countries declined 0.2% per annum in the second quarter and the third quarter. This is the first recession since the euro first appeared in 1999. In the atmosphere suffering from panic, the European government adopted a policy aimed at keeping the recession short. From a monetary policy perspective, the European Central Bank coordinated the rate cut. On 4 December, the European Central Bank, the euro area monetary policy manager, lowered the interest rate simultaneously with the Bank of England and the Swedish central bank in Sweden. A week later, the National Bank of Switzerland reduced the benchmark interest rate to 0 - 1%. In terms of fiscal policy, most European governments are trying to approve public spending plans to inject capital into the economy.