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Finance & Accounting
Pages 4 (1004 words)
The European Debt Crisis [Course] [Professor] [Student name] [Date] Abstract The euro, being the European Union’s (EU) sole currency since 2002, strengthened the major trading area in the globe and quickly challenged the dollar for international dominance.
The crisis accentuated the economic interdependence of the EU, as it highlighted the deficiency in the Eurozone’s political integration which was vital for the provision of a well-harmonized and effectual financial response. To ease the debt crisis and improve economic status, EU’s richest members encouraged the most highly indebted EU members to cut down on government expenditures and programs and to increase their taxes. Despite efforts, market instability continued until the end of 2011, thus questioning the future of the euro (Alessi). This paper will discuss the European debt crisis and the mitigation measures implemented to resolve the issues. The European Debt Crisis The Maastricht Treaty outlined the conditions for European nations aiming to be a eurozone member by organizing its finances through guaranteeing an annual inflation not exceeding 1.5%; maintaining finance debits up to 3% of GDP; and keeping a debt-to-GDP ratio below 60%. The European nations agreed to tighten budgets by decreasing public expenditures and increasing tariffs. However, the enforcement of the EU conditions was not strictly implemented (Wignall and Slovik). Since the 1930s, the European Union was in serious economic downturn with actual GDP expected to plummet by 4% in 2009, the biggest decline ever recorded in the EU history. While indications of improvement have been observed, economic revival stays improbable. ...
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