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What Were The Main Causes of The Eurozone Debt Crisis of 2010/2011, and What Have Been The Significant Policy Responses To That Crisis - Essay Example

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What Were The Main Causes of The Eurozone Debt Crisis of 2010/2011, and What Have Been The Significant Policy Responses To That Crisis

It has been apparent from the working paper of International Monetary Fund (IMF) that since early 2010, the Eurozone had faced significant effects from the recent debt crisis. The countries belonging to Eurozone that have subsequently faced the major debt crisis included Greece, Portugal as well as Ireland. Among these three Eurozone countries, particularly Greece has been viewed to be the main sufferer of the resulting debt crisis that took place in the Eurozone. It has been reported that Greece possessed the highest level of public debt along with significant budget deficits in the year 2010. In this connection, the sufferer countries belonging to Eurozone i.e. Portugal, Greece and Ireland eventually turned to other European nations as well as the International Monetary Fund (IMF) for financial assistance with the intention to avoid default on their huge public debt. However, Greece was the first Eurozone member to realise strong market pressure and also the first nation to turn up with other European nations along with IMF for financial support and assistance. Thus, from the above facts, it can be stated that among the Eurozone countries or members that faced the debt crisis, the market condition, especially of Greece, was quite deteriorated through increased public debts that ultimately made the country to emphasise on accepting financial support from other European nations and from the IMF (Pescatori and Sy 2004). With due consideration to these facts, the discussion in this paper will perpetually portray the various significant impacts of the debt crisis that took place in Eurozone upon various grounds, important causes for the debt crisis and the momentous policy responses towards the crisis. A Brief Idea of the Impact of Eurozone Debt Crisis The wide emergence of the debt crisis of Eurozone imposed noteworthy impact upon several grounds that largely include political and economic factors among others. From the perspective of the political grounds, certain number of members belonging to various political parties showed utmost importance towards the involvement of International Monetary Fund (IMF) during the crisis that was faced by the Eurozone countries. In this connection, in the year 2010, the then government passed the legislation for the purpose of limiting the active financial assistance of IMF to the advanced economies. In terms of the economic factors, the debt crisis that occurred in the Eurozone countries, especially in Greece, Portugal and Ireland, posed momentous impact upon the economy of United States as well. The debt crisis of the Eurozone countries might be regarded as a strong financial issue due to the fact that the debt crisis could hamper the exports of United States making the currency value of Eurozone countries (i.e. Euro) to decrease in value against the US currency (i.e. Dollar). It is obvious to the fact that the emergence of the debt crisis could largely increase different kinds of financial risks that can pose large impact upon the financial markets of United States (Nelson, Belkin and Mix 2011). Furthermore, the Eurozone debt crisis imposed major effect upon the exposure of the banks belonging to United States. Noticeably, the banks of the United States possessed little exposure to one of the debt crises which affected Eurozone country, Greece, but significantly held certain greater financial ...Show more

Summary

The conception of debt crisis can fundamentally be defined as a massive public debt that is not repayable by any particular nation or a national government and ultimately seeks for financial aid from other countries or any financial institutions (Pescatori and Sy 2004)…
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What Were The Main Causes of The Eurozone Debt Crisis of 2010/2011, and What Have Been The Significant Policy Responses To That Crisis essay example
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