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Current International Debt Crisis (Greece Crisis) - Essay Example
Finance & Accounting
Pages 4 (1004 words)
Current International Debt Crisis (Spain Crisis) Contents Contents 2 Euro zone Crisis 3 Spain Economy before and after the Crisis 3 Sovereign Risk and its Effect on Spain 7 Whether Spain should leave the Euro zone to save the Euro Currency from a German Tax payer’s point of view 7 References 9 Euro zone Crisis The debt crisis has affected all the countries that belong to the European Union since 2009…
The countries had fallen into a debt trap and there was problem of cash crunch and liquidity crisis in the banking sector. Thus the Euro zone faced both fiscal and monetary policy problems along with a slowdown of the economies. The main reason behind this is the common monetary policy that these countries have owning to the adoption of the Euro currency across the entire zone but different fiscal policies for each of the countries. The countries of this zone had decided to limit their borrowings to a certain designated level but they could not restrict the borrowings to that level (Feldstein, 1997, p.31). Thus there was a problem of convergence for all the countries that came under this zone. Spain Economy before and after the Crisis Since the year 2004, in the post election era, the economy of Spain has experienced a steady growth rate. This was followed with a boom in the housing market clubbed with a hike in the oil prices. However, the trade deficit of the country continued to increase along with an increase in the rates of inflation. The housing bubble that took place in Spain faced a set back and the country fell into a complete debt trap which led to this financial crisis. This continued till 2011, with the trade deficit accounting for, as high as 8.5% of the GDP. ...
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