From The Debt Crisis To Study The System Defect Of Euro-area

In 2007, the subprime crisis broke out in America and subsequently caused the financial crisis globally. When the crisis still affects the world economy, Greece, as a member of Euro-zone acclaimed that they have got into financial dilemma,and then the same problem spread out in other member countries. And these countries turned to EU for help,but according to no-bail out clause prescribed in Maastricht Treaty and Stable and Develop Pact, EU government didn't have immediate response, therefore, the situation worsen in Euro-zone.The debt crisis in Euro-zone caused many discussions among economists home and abroad, they discussed the designing defects of Euro-zone:One monetary policy and many fiscal policies. The European monetary union founded its central bank (ECB),ECB is in charge of the formulation and implementation of monetary policy,and the member countries implement single monetary policy. In fiscal policy,member have their own fiscal policy and common fiscal policy,but the common policy take a little part.The Euro-zone has single currency,but it doesn't meet the standards of optimum currency areas, and its system defects in macro-economies exposed in debt crisis.The ultimate goal of monetary policy is to ensure the stability of market price,and fiscal policy must coordinate with it to accomplish the goal. However, the monetary policy has no obligation to coordinate with fiscal policy of individual members therefore, when member countries implement fiscal policy,it's difficult to achieve the desired goals. In addition,as the difference of member countries in economy, when carrying out monetary policy,the effects different in these countries,and it is difficult to satisfy every member.The asymmetry in monetary policy is mainly caused by the difference of member countries therefore it's urgent to promote convergence.As the spillover effects of fiscal policy and free-rider in Euro-zone, it is compulsory to discipline fiscal policy. Therefore, Maastricht Treaty and Stable and Develop Pact prescribe deficit and debt proportion in GDP, but in implementation in recent years,many member countries broke the line.The paper based on IS LM curves and M-F model to analyze the spillover effect. The member countries have impulse to increase deficit to boost economy,as they don't worry the price stability and exchange rate,but when most countries increase their fiscal expenditure,it will affect the price and exchange of the whole area, the interest rate rises and export decrease, and harm the interest of the Euro-zone.In the long run,the Euro-zone should reform in macro-policy design, and meanwhile member countries should optimize their expenditure. Their social security benefit expenditure takes a large proportion in GDP and causes bad effects in labor market. So to optimize fiscal expenditure and boost convergence is urgent to promote economy growth.China has wide territory and the economy is imbalance regionally,which has a little similarity with Euro-zone therefore,we should learn lessons from it in its monetary and fiscal policy,and promote balance development in different regions.