Debt Crisis : A Deadly Blow

As of 2012, only seventeen of members of the European Union have decided to use Euros as their currency. In order for the members that adopted the Euro as their currency to successfully help their economic problems, the Eurozone members had to follow strict instructions put into place the European Union. The strict policies included strict control over inflation, government debt, and long-term interest rates (Mckee 525). The union put these strict policies into place to give the union the tools that it needed to take in order to help fix the economic crisis in each country participating in the Eurozone. Without the full cooperation of each country, it could cause the plans to fix the economic crisis within each country to fail because of the different interests by each individual country.

During presidential bids for the White House and Congressional deadlines for increasing the debt ceiling, huge debates break out as to the enormous amount of debt incurred by the federal government. Throughout our nation’s history, national debt at this magnitude is a new things. The accumulation of this amount of debt has its consequences, especially when the debt hits the nations GDP (Gross Domestic Product), or the revenue the nation takes in per year.

America was once known for being one of the richest nations, now facing a modern day depression. America starting noticing the economy going down during the collapse of the Lehman Brothers, and the global banking failure in 2008. This debt has become a burden amongst college students and the middle class Americans. This long lasting debt seems to be a drag and has no chance of getting better anytime soon.

In the American nation and all around the world, the spending is increasing and the revenues of the households are falling (Truth, 2010). It was noticed in the year 2010 that the spending was about 24 percent of the Gross Domestic Product (GDP) hence this has made the federal budget to increase drastically from 33 percent to 62 percent in the year 2010. Therefore, another reason for the “debt crisis” is because of the federal spending which is projected to increase at a father rather than the rate at which the revenues are generated. Hence it was stated by The Congressional Budget Office (CBO) that if the deficits keep on increasing at this pace, they are projected to be increased to about 90 percent in the year 2020. If this occurs, it will be a major setback for America and for the whole world.

Monetary policy, which is usually managed by a central governing financial body, has become very out of focus in the EU. This power was once held by governing bodies in each individual country, thus allowing for them to make changes that helped their country and citizens the best. This apparatus once allowed a buffer to radical changes in the national economy and national disasters; which was taken away as the European Central Bank (ECB) became the single body that governs the monetary policy and action plans of the EU (Wypolsz, pg. 239). The ECB now has to consider all of the sovereign bodies within the EU and the power of the euro as a whole, not trying to combat supply issues in Italy that affect their real GDP or the disasters in London that might have led to a decline in expenditures by citizens. Looking at Graph 1 we can see the sporadic spread of government bonds in the different countries within the EU. The graph shows the instability of the Euro because the government bonds of each state fluctuated when Italy was rumored to be leaving the EU, to return to their economy. This shows that the monetary policy actions of the ECB cannot really benefit all of the EU equally. It has been noted that France and Germany have flourished best under the euro, which is where the ECB and other bodies of the euro exist (Sheridan). Sheridan

The Global Financial Crisis revealed many flaws in the institutional framework of the Eurozone, as well as the flaws in the policies implemented in the aftermath of the revelation of the crisis. One of the major flaws revealed in the institutional arrangement of the Eurozone project, is the clause in the Maastricht Treaty which limits the ceiling on the ratio of the annual government deficit to gross domestic product. As a result of the Global Financial Crisis, The Maastricht Treaty put into place structural impediments that prevented member states from implementing counter-cyclical policies. It is likely that the crisis left a deep and long-lasting effect on economic performance and overall social hardship. Job losses were contained for some

The European Debt Crisis often referred to as the Eurozone Crisis, struck the European Union at the end of 2009.

The Eurozone is facing a serious sovereign debt crisis. Several Eurozone member countries have high, potentially unsustainable levels of public debt. Three—Greece, Ireland, and Portugal—have borrowed money from other European countries and the International Monetary Fund (IMF) in order to avoid default. With the largest public debt and one of the largest budget deficits in the Eurozone, Greece is at the centre of the crisis. The crisis is a continuing interest to Congress due to the strong economic and political ties between the United States and Europe.

The Eurozone faced competition among actors regarding who can explain the reasons behind the emergence of the crises and the best way to resolve the challenges facing them (Apak and Atay 2012: 561). Germany is always on the center stage in the Eurozone crisis due to its economy strength and Chancellor Angela Merkel’s ability to negotiate the response to the crisis (Apak and Atay 2012: 562). According to Apak and Atay (2012), Merkel worked to promote the budgetary rigor and austerity, hence portrays the overwhelming national debt as the cause of the crisis. Merkel also disputes the structural weaknesses or imbalances in the Euro area as a cause of the crisis as asserted by Feldstein (2010). Her aim is to dominate the narrative of the

The European sovereign debt crisis, which made it difficult or impossible for some countries in the euro area to repay or re-finance their government debt without the assistance of third parties (Haidar, Jamal Ibrahim, 2012), had already badly hurt the economies in “PIIGS”, Portugal, Ireland, Italy, Greece and Spain. This financial contagion continues to spread throughout the euro area, and becomes a dangerous threat not only to European economy, but also to global economy.

This paper is concerned with the concepts of accountability; representation and control explain the euro debt crisis in detail. The author takes a deeper journey into the meaning of occurs of Euro sovereign debt crisis by use of definition of ARC to in-depth explain this issue. We propose further examination of the ARC relating to the Euro sovereign debt crisis in order to propose a prosperous and harmonious of Euro zone.

Europe's debt crisis is a continuation of the global financial crisis and also the result of how Europe attempted to solve the global financial crisis that brought an end to a decade of prosperity and unrestricted debt. European attempts at defending itself against a deep recession, has now created a new crisis of unsustainable and un-serviceable sovereign debt. In early 2010 fears of a sovereign debt crisis, the 2010 Euro Crisis developed concerning some European states including European Union members Portugal, Ireland, Italy, Greece,  Spain,(affectionately known as the PIIGS) and Belgium. This led to a crisis of confidence as well as the widening of bond yield spreads and risk insurance on credit default swaps between

Euro crisis also known as European sovereign debt crisis resulted from a combination of factors, including the globalisation of finance, easy credit conditions during the 2001–2008 period that encouraged high-risk lending and borrowing practices; the GFC which exposed the fiscal weakness and high debts levels of many nations; international trade imbalances; real estate

The debt crisis, explained above, in several member states of the euro area has contributed in raising doubts about the viability of European Economic and Monetary Union(EMU) and the future of the euro.

In 1999 seventeen countries in the European Union adopted the Euro forming a Euro Area. With the adoption of the Euro these seventeen countries discontinued their old currencies and monetary policies. Monetary Policies