European Debt Crisis Essays Example
European debt crisis, also known as Eurozone sovereign debt crisis, is an ongoing multi-year debt crisis happening in many Eurozone countries. After the great recession of 2008 hit the world, some of the European nationalized banks felt the pressure of shrinking market and was unable to sustain on their own without help from the International Monetary Fund (IMF) and European Central Bank because of their huge loan exposure to public sector of different Eurozone countries, which they were unable to recover (BBC, 2012). This started the sovereign debt crisis in Europe towards the late 2009 with Greece and Ireland being the first two countries unable to pay their debts fully because of a widening budget deficit (BBC, 2012). The public sector salary and pension fund burden was very high for Greece, and the country was unable to pay salary to its government employees and pension holders. When Greece was on the verge of announcing bankruptcy, countries like France and other EU countries panicked as they had huge loan exposure to the Greek nationalized banks (Mead and Blicht, 2014). Soon other Eurozone countries with large debt burdens due to higher public sector expenditure and widening budget gap were on the verge of bankruptcy. Ireland, Greece, Spain, Portugal and Cyprus announced bankruptcy and subsequently got bailout loans from the IMF and European Commission. Ireland, Portugal and Spain were able to fulfill their loan commitments and now out of the bailout package as of 2013 (BBC, 2012). However, Greece continues to be the main problem for Eurozone with a newly elected government that does not want to maintain austerity to repay the bailout loan. Eurozone economy is still sluggish. Eurozone was created as a currency union and not as a financial union. Therefore, all the countries have their own pension, tax and public sector rules despite using the same currency. Countries like Germany was doing very well and continues to do well as they already had a good financial regime in place whereas other countries with lousy national policy and huge budget gap continue to pull down the whole Eurozone economy (Mead and Blicht, 2014).
References
Mead, N., and Blicht, G. (2014). Eurozone crisis timeline: crisis, recession and growth. The Guardian. Retrieved on 16th Feb, 2015 from <http://www.theguardian.com/business/interactive/2012/oct/17/eurozone-crisis-interactive-timeline-three-years>
BBC. (2012). Timeline: The unfolding Eurozone crisis. Retrieved on 16th Feb, 2015 from <http://www.bbc.com/news/business-13856580>
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