Debt Crisis : A Deadly Blow

1141 WordsMay 18, 20165 Pages
Debt Crisis: A deadly blow to the European economy Breaking down European sovereign debt crisis: The root causes of the European debt crisis stretches us way back to the purpose and structure of the formation of EU. It was the purpose of economic cooperation that contributed to the transformation of this ‘zone of war’ to ‘zone of peace’. Consequently, the political cooperation among the European countries fulfilled the structural framework in economic sector designed to make it a region of mostly devoid of trade barrier among the countries. The roadmap of making it a hub of free market economy was fostered by the launch of a single currency across the region ‘EURO’, currently the common currency of 19 states out of 28 EU member states creating a ‘EURO Zone’. Also, simultaneously it created Economic and Monetary Union (EMU) maintaining a uniform monetary policy in EURO Zone. However, EMU is not a single institution, its main actors are ("Economic and Monetary Union - European Commission", 2016): 1. The European Council 2. The Council of the EU 3. The ‘Eurogroup’ 4. The Member States 5. The European Commission 6. The European Central Bank (ECB) 7. The European Parliament. Nevertheless, the EURO Zone countries do have different fiscal policies of their own and here lies root cause of the debt crisis. A uniform monetary policy but different fiscal policies mean that the EMU controls the flow of money in the EURO Zone affecting the interest rates of this region where the
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