The Reasons For European Sovereign Debt Crisis

A sovereign debt crisis is basically a government debt, also known as a national debt; it is money or credit owed by any level of government. Government deficits refer to the difference between government receipts and spending in single year. Debt of a sovereign government is called sovereign debt, which is an indirect debt of the taxpayers. This debt can be categorized as internal debt, owed to lenders within the country and external debt owed to foreign lenders. Governments usually barrow by issuing securities, government bonds and bills, rarely do they barrow directly from supranational institutions. Moreover, Government debt considers all government liabilities, including future pension payments for goods and services that the government

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

In this research paper, we will be covering the causes, financial repercussions and social implications of this crisis. We will also be examining the methods used by the Greek government to rescue the economy. To conclude, we will discuss possible resolution measures and objectively forecast the future

The Eurozone crisis is defined as a multi-year debt struggle that began as early as 2009 and originated in several of the Eurozone states. These countries were not able to pay back the debt they continuously built up even with help from institutions such as the European Financial Stability Facility, the European Central Bank, and the International Monetary Fund. The debt the European Union members acquired were not considered a crisis until after the Great Recession in 2009. This is because some countries released false reports, which soon became discovered, regarding their economic stance. States were able to deceive other nations by inconsistent accounting, off-balance sheet transactions, and the use of complex currency and credit derivatives structures. Greece is considered the main culprit for causing the majority of the debt within the European Union. The Economic and Financial Committee are responsible for receiving and organizing these reports. Fabricated reports were easy for nations to submit due to the established rules set and the organization of the Maastricht Treaty created on February 7, 1992 right before the European Union was established.

Around 2008, the global financial system was suffered a destructive crisis which especially destroyed the western financial world heavily. To prevent such crisis in the future, discussions and debates were being heated. Solutions and measures were proposed by many countries’ regulators. Factors that several reasons underlie the financial crisis have been widely blamed, for

The European debt crisis was a financial phenomenon that affected multiple countries around the world and the shockwave almost collapse the global market. One of the countries that were greatly impacted by the crisis was Spain. Some of the implications of the event caused unemployment to skyrocket, debating the role of the European Union and the state Catalonia is seeking their independence. Ultimately, the Euro Crisis showed the weakness of the European Union and debate if it would last into the future.

The economic crisis within the Eurozone has grown rapidly for the past five years, and members of the European Union struggle to enact any effective measures to halt or reverse its effects. Perceived booms in the housing markets were really only bubbles which popped and sent entire national economies spiraling downward into recession. Nations of the Eurozone have accumulated massive public debts, far larger than the 60% of GDP maximum specified in the Stability and Growth Pact. In 2011, Greece’s debt reached an unbelievable 170.3% of its GDP. Economic punishments are the specified consequences for violating this regulation, but the pact has not been adequately or consistently enforced. So many states have fallen past the debt limit that

It’s no secret that Greece is in quite a predicament. The country is currently in the midst of a crisis that reaches not just all parts of Greek society but a global stage as well. Is Greece at the point of no return, will they end up defaulting on their massive debts from combined lenders, breaking away from the European Union (EU) and the singular monetary system of the Euro? While many people think that is the way to go for Greece, the government could also find solace in the examples of other EU countries. By looking at how these countries were in the same situation as Greece yet have managed to make the necessary spending cuts and social reforms, and in doing so have regained control. This paper, provided will be an overview of the

Background: From 2009 onwards several Eurozone countries have come under pressure from the financial markets as a result of rising debt levels, economic contraction and decreasing solvency indicated by all major rating agencies. Through raising funding prices on the markets and the lack of trust in these Eurozone members – they were not able to finance themselves to sustainable costs anymore. One country after the other (Greece, Ireland, Portugal, Spain and Cyprus) had to be “rescued” by the then established financial support measures such as the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM). In exchange for these “bail-outs” countries had to fulfill certain economic conditions – mostly spending cuts – which led in turn to political change and instability.

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.

3). There have been a number of factors contributing to Greece’s fiscal crisis- both endogenous and exogenous. When focusing on the endogenous causes of the fiscal crisis, “there is no doubt that running consistently widening public deficits in conjunction with declining external competitiveness played a decisive role on the deteriorating fiscal stance of the Greek economy” (Kouretas, Vlamis, 2010, 394). Greece’s deficit has risen to 12.7%, which is more than four times higher than the European rules have allowed (BBC News, 2010, para. 8). On the other hand, the main exogenous implication is the timing of response. “The Eurozone governments failed to give a clear signal indicating their readiness to support Greece, while the Greek fiscal crisis was escalating,” because many EU Member States were unsure of how much assistance they could individually given to a country in financial difficulty (Kouretas, Vlamis, 2010, 396). In addition, Greece has been facing problems with the underground economy, which is also known as the “shadow economy.” The shadow economy focuses on criminal activity, such as drugs sales, smuggling, gambling, etc. and focuses on legal transactions that are conducted in cash and unreported to fiscal or other competent authorities (Katsios, 2006, 62). Greece has been accountable for about 27-30% of the GNP for the underground economies in comparison to various European countries (67). With all these financial issues going on in Greece, there is a

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.

Due to the economic recession which started in 2008, several members of the European Union became historically known as PIIGS. These states include Portugal, Italy, Ireland, Greece and Spain. The reason why these countries were grouped together is the substantial instability of their economies, which was an evident problem in 2009. The reason why the five countries gained popularity is a serious concern within the EU, with regard to their national debts, especially for Greece. The latter country was involved in a controversial affair after allegedly falsifying its public financial data. In the year 2010, it was evident that the five states were in need of corrective action in order to regain their former financial stability.

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 five main factors that participated and caused the debt crises in Europe are the Violation to EU rules, at the beginning of the whole story European nations were a little eager to form a monetary union that took them some several steps ending with the beginning of the euro 1999 as several participants violated and dishonored the circumstances required under the Maastricht Treaty in the year 1992. Well, there are countries such as Cyprus and Greece, these countries did not really give actual data or facts about economic and financial condition, whereas the EU completely knew about the fact that they didn’t give any real figures or facts, they just went on and ignored it but yet accepted and acknowledged the agreement of such regions to enlarge and widen the European union. The whole problem does not really position at that extend and the amount but it stands in where the EU also accepted the high budget deficit that has occurred and the debt stages /levels by some numerous countries through the crisis. Another factor that caused this collapse is the banking sector, the banking sector faced some problems that lead to debt crises, talking about the European banking sector here. It dramatically appeared to be vulnerable by showing an intense collapse since it got into the financial global chain that was unfortunately been dragged down during the financial crises in 2007. Basically there are some of the financial instruments involved that has high risk such as