The Crisis Caused By The Collapse Of The American Investment Bank

1623 Words7 Pages
After the 2008 crisis caused by the collapse of the American investment bank, the Lehman Brothers, the Europe Union faced difficult decisions to both recover the economy in the short term and in improving the economy for the long. ‘With their immediate response to the Banks in Europe giving them €4.5 trillion, the European Union then had to respond to the debt crisis that occurred as they realised a debt fuel economy was not stable. They then came together to form an Economic union where by a fiscal treaty was created, the idea behind the treaty was to limit yearly deficits to 0.5% of a country’s GDP’[1], this is the idea of a Budgetary policy, aiming there deficit, equilibrium or surplus to reduce debt. The policy was to follow the principles, ‘it should be timely; this is to allow for quick support of economic activity during low demand, temporary; to avoid a permanent deterioration in budget positions, the spending when borrowing low should be mix with both revenue and expenditure ideas; there can be impacts on demand in the short term affecting consumption allowing for growth, it should be directed within the stability and growth pact; it provides a common framework and allows for better measures to be take of the cyclical conditions while strengthening long term fiscal discipline, and should be accompanied with structural reforms that support demand.’{2] What if the European leaders had not come up with a fiscal union and didn’t come together to form the fiscal
Open Document