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The European sovereign debt crisis - Assignment Example

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THE EUROPEAN SOVEREIGN DEBT CRISIS Name Institution The European Sovereign Debt Crisis The European region has experienced interrelated sovereign debt and banking crisis. Bonds spread by countries such as Ireland, Greece, Spain as well as Portugal increased during the crisis…

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The European sovereign debt crisis

Consequently, the euro debt crisis is crucial as one intends to study its spillover effects. This is because the crisis was characterized by decisions and events at a political level (Acharya and Steffen, 2012, p. 12). In this case, the Euro debt crisis will be viewed as a financial phenomenon that affected the European region. Historical events associated with the Euro sovereign debt crisis will investigate the negative watches and downgrades on European governments, financial markets, stock, and bond markets. The Euro sovereign debt crisis reached its peak in March 2012 after Greece conducted the largest sovereign debt restructuring. Countries such as Spain, Ireland, Italy and Portugal were also facing serious financial crisis. It is essential to note that all member states of the European Monetary Union provided loan guarantees. As a result, the creditworthiness of the region was at stake (Ahearne, Griever and Warnock, 2004, p. 316). The effect of this event was that all member states of the Euro, even states that had sound public finances, were subjected to downgrades or placed on negative watches by global rating agencies. Some of the countries lost their investment grade statuses. This is an alarming signal for international investors. Before, the first country was downgraded, speculation against the EURO was attracted and the stock markets turned down. ...
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