The Eurozone Faced Competition Among Actors

Some of the causes of and factors that have exacerbated the crisis include a misperception of risk leading to rising national debt levels, trade imbalances, structural issues with the Eurozone system and monetary policy inflexibility.

The weekend of May 5-6 opened a new chapter in the Eurozone debt crisis as voters in France and Greece voiced their disproval over current leadership. With news of France's Sarkozy losing the presidency, and "a dismal election result for Greece's pro-bailout parties" (Reuters.com. May 7, 2012. PP. 1); the future of the Eurozone continues to be shrouded in uncertainty. Debt yields for Greece, Ireland, and Portugal spiked as bond investors ruminated over fiscal and monetary policies. Likewise in Spain, the ten year bond pushed closer to the "psychologically important 6 percent" (Reuters.com. May 7, 2012. PP. 1) threshold. These events highlight the troubling issues of austerity, growth, and debt service which are weighing down the European economy, and as a result imperil the global economic growth story.

Germany is one of Europe’s industrial powerhouse and the world’s second largest exporter. The country whose economy has single-handedly stopped the eurozone falling back into recession and the only nation rich enough to save the

From the Financial crisis that struck the United States in 2008, to the world economic crisis and currently the European debt and sovereign crisis, the snowball is growing each day as the whole world's economy is heading towards the rock bottom. This project tackles the issue and the causes of the European debt crisis and its consequences on the euro currency and on the international financial markets. It also focuses on examining the austerity measures and policies taken by European governments to bail their countries out of the turmoil, and finally it tenders solutions that could be undertaken by governments to face or unravel such

These policies, coupled with a period of global economic prosperity in the early 2000s, helped make Germany the economic powerhouse of Europe. Today, with Chancellor Angela Merkel (first elected in 2005) Germany remains the economic backbone of the European Union and is a major player internationally as a G7 country and a regular rotating member of the UN Security

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.

Of all the examples of neoliberal policy failure since the Great Recession, the eurozone crisis stands out as a work of art. The European authorities who made this mess – the European Commission, the European Central Bank (ECB), and the International Monetary Fund (IMF)—known as “The Troika”—provide one of the clearest, large-scale demonstrations in modern times of the damage that can be done when people in high places get their basic macroeconomic policies wrong. That it has happened in a set of high-income economies with previously well-developed democratic institutions makes it even more compelling.

The German economy has progressively developed from the effects of the global financial crisis, which had a serious negative impact both on Germany’s public finances and on its economic growth. Actions

In order to fight the crisis some governments within the European Union had focused on raising taxes and lowering expenditure. This raise of taxes and lowering of the governments expenditure contributed to social unrest as it is only natural the living population would much rather not pay higher taxes (Eichler, 2011). Sovereign debt had risen substantially in only a few Eurozone countries, most dramatically in countries like Greece, Ireland and Portugal. Although only a small amount of countries had a debt crisis or where on a path of having a debt crisis, it had become a perceived problem for the rest of the European union countries as the threat of further contagion was on the brink and a possible break-up of the Eurozone was in peoples thoughts. The global credit crunch in 2007/ 08 affected and exposed countries to the sovereign debt crisis. The credit crunch alludes to a sudden deficiency of trusts for giving, prompting an ensuing decrease in advances accessible. This credit crunch was constrained by a sharp climb in defaults on subprime contracts. These home loans were predominantly in America however the ensuing deficiency of stores spread all through whatever remains of the world particularly in Europe. This credit crunch led to many changes within the Eurozone, the following are some of the changes that the credit crunch caused; bank losses such as commercial European banks lost money on their exposure to bad debts in US, recession that resulted

As Europe slipped into recession in 2009, a problem that started in the banks began to affect governments more and more, as markets worried that some countries could not afford to rescue banks in trouble. Investors began to look more closely at the finances of governments. Greece came under particular scrutiny because its economy was in and successive governments had racked up debts nearly twice the size of the economy. The threat of bank failures meant that the health of government finances became more important than ever. Governments that had grown accustomed to borrowing large amounts each year to finance their budgets and that had accumulated massive debts in the process suddenly found markets less willing to keep lending to them. Hence, what had once begun as a banking crisis became a sovereign debt crisis.

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.

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 is the European Debt Crisis? The European Debt Crisis is the failure of the Euro, a currency that ties seventeen European countries together. In this paper, I will be describing the cause and effect of the debt crisis along with what would happen if the European Union stayed with the economy they have. Then what I believe is the best solution to fixing the debt crisis.

The crisis has hit European economies unprecedentedly hard and its effects have occurred in two phases. The first phase is the economic recession following the global economic downturn. The second phase is the so-called sovereign debt crisis which started in Greece firstly and then appeared in Ireland and Portugal. Like many other countries and organizations, European Union (EU) has also developed strategies in order to tackle the challenges of the crisis (Yurtsever, 2011).

The aim of this essay is to provide a framework for uncovering the current state of the EU. Firstly, it is important to briefly summarise how the sovereign debt crisis manifested inherent structural flaws within the European Union. From this point it will be argued that the debt crisis can be used as a platform for deeper integration in that the inherent design features that plagued the Union can now be recognised and perhaps transformed. Secondly, it will be argued that the debt crisis has exacerbated the division between the creditor countries of Northern Europe and the debtor countries of southern Europe. A climate of ‘us and them’ has certainly manifested across Europe, which raises concern to nationally elected representatives of the