The European Debt Crisis [Course] [Professor] 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. The response of the EU to the recession had been fast. Besides the intervention to steady and restructure the banking sector, the European Economic Recovery Plan (EERP) was commenced in 2008 for re-establishing reliance and reinforcing demand by increasing the economy’s purchasing power through balanced tactical financial schemes and measures that would support the business and employment sectors. The entire economic incentive and the outcomes of regulated fiscal stabilizers total 5 percent of European GDP (“Economic Crisis in Europe: Causes, Consequences and Responses”). The execution of crisis emergency measures by European members momentarily sustained the labor markets and heightened investments in the public infrastructure companies. To guarantee the economic resurgence and to continue the European nations’ future development possibilities, the focus must change from temporary demand administration to a long-term supply management, otherwise, it could hamper EU’s reformation or build damaging deformations to the Internal Market (“Economic Crisis in Europe: Causes, Consequences and Responses”). European Crisis Mitigation Measures In 2010, the leading European nations implemented an emergency protocol to cease the mounting fiscal market strains arising from distress about the financial recovery of indebted European nations (Ahearn et al). Financial Aid to Greece, Portugal, and Ireland In 2009, existing alarms concerning the sustainability of household finances in some Eurozone nations started when the sentiments of financiers turned against Greece. Over the past ten years, Greece had loaned deeply in the global capital markets to sustain soaring government expenses, banking system inflexibilities, and deteriorating competitiveness (Nelson). Access to funds at minimal interest rates and poor imposition of EU regulations regarding debit limits facilitated the onset of today’s European sovereign debt dilemma (Nelson et al). Greece, Ireland, and Portugal have been given considerable financial supports by the International Monetary Fund (IMF), the Eurozone and EU monetary ...
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(The European Debt Crisis Research Paper Example | Topics and Well Written Essays - 1000 Words)
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The sovereign Crisis began because of the dysfunction of the monetary union of the states within the Eurozone in addition to the politicizing of the economic control in Europe. The Impact of the European Sovereign Debt Crisis includes the reduction of the bond yield in the United Kingdom.
This caused the government miscalculated its budget and planned to introduce defensive strategies since Greece and Turkey were experiencing some political and economical differences. The investment of the government of Greece took a wrong turn since between mid 2000s and 2010 the economy begun to depreciate worldwide.
1. Introduction The European debt crisis brings as a result of how Europe had made an attempt to solve the financial crisis faced by most countries and as a result an immediate end in their prosperity and put them in great debts. In an attempt by the European to defend itself against collapse has created a new crisis untenable and into debts that are not easily serviceable.
Governments prepare deficit budgets and, therefore, have to borrow resources from either internal or external sources in order to finance the deficit. This situation, if not well controlled and monitored, increases the total government debt. The credit ratings of most European countries like Spain, France, and Italy significantly declined as revealed by the moody and S&P during the year 2010 and 2011 (Mora, 2006).
Spain has become a concern to many countries in the world, this is because the Euro is the most preferred currency, and this has affected many countries that rely on it for export or exchange. Some of the reasons that have caused this worry are: the high interest rate demanded by the Government for the last decade which has increased to above 6%.
Therefore, they must constantly pull together or unite if they are to maintain economic prosperity and compete favorably in the global stage with other strong economies. Experts agree that no European member state’s economy is solid enough to compete alone in the global trade.
Additionally, its debt-to-GDP ratio at 120% was twice the limit allowed in the Maastricht treaty. Soon after, Portugal, Italy, Ireland and Spain made similar statements. In the last few years, all countries mentioned have implemented forms of austerity measures, experienced inflation, and unemployment has risen, slightly in some, dramatically in others.
The debt crisis affected a number of countries like Portugal, Greece, Spain, Italy and Ireland among others. In the year 2001, Greece joined the EU (Schäfer, 1). Greece had to pay a return rate that was higher than the fiscal market.
s, consequences and implications of international debt crisis, it is in order to delineate the unblemished concept ‘debt crisis’ Debt crisis deals with national economies and their abilities to repay loans. It is a situation when nations are not able to pay the debt it owns
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