Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

European Sovereign Debt Crisis - Essay Example

Comments (0) Cite this document
The European Union’s inability to handle the debt crisis in Greece is shaking the financial markets across the entire continent. The impacts of the debt crisis are being felt across the money, valuing of capital and derivatives…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.6% of users find it useful
European Sovereign Debt Crisis
Read TextPreview

Extract of sample "European Sovereign Debt Crisis"

Task European Sovereign Debt Crisis The European Union’s inability to handle the debt crisis in Greece is shaking the financial markets across the entire continent. The impacts of the debt crisis are being felt across the money, valuing of capital and derivatives. The euro’s value is deteriorating on a daily basis and the costs involved in protecting commercial bonds are on the increase. The values of capital goods have also been on the decline around the globe. There has been an increase in the investors’ fear concerning the market trends around Europe (Eichengreen, 2002). There is a growing concern among the investors that the union will not be able to keep these impacts from spreading throughout the continent. Major investors such as French banks have been withdrawing their presence from Greece due to the fears they have in the economy.
The debt crisis has had many implications on various markets ranging from bonds, gold, equity, forex and other derivatives. The crisis resulted in the underwriting of bonds since many financial institutions had purchased them from the weak economies within the union. These countries in return did offer little premiums that seemed secure (Eichengreen, 2002). These bonds continued to pose more risks as the effects of the debt crisis worsened. The prices of gold, forex, equity and other stocks across the union have also been undervalued because of the debt crisis. This is because the countries that are enjoying growth are being forced to lag behind by the countries at the heart of this crisis.
The concept of sovereign default refers to the failure by the authorities in an independent country to repay their debts completely. This could also result in the occurrence of a debt crisis in the independent nation (Manasse, Schimmelpfennig and Roubini, 2003). When the lenders perceive a country as refusing to repay their debts they demand higher rates of interest from them. This is due to the risk of defaulting on these loans. A country defaults on the repayment of their loans mainly due to bankruptcy and the collapse of the previously ruling regime. In Russia, the collapse of the Communist regime left the individual states bearing the burden of the previous communist bloc. These states in turn refused to pay the loans that had previously been incurred (Manasse, Schimmelpfennig and Roubini, 2003). Because of their actions, their debts were reduced, but the countries ended up losing the credibility of the lenders in the capital sector. The members of the Euro zone should avoid similar circumstances as they could hamper their growth efforts.
The European Union has formed several bodies to counter the effects of the debt crisis. Among them are the formations of the stability facilities for financial services within the union. This body’s name recently changed to the financial stabilization apparatus for Europe. These bodies are charged with the responsibility of funding economies encountering hardships. They use money raised from their fiscal markets with the approval of the union while using the union’s budget as their security (Khamful, Chirwa and Mlachila, 2006). These bodies have been successful in raising the values of their investments markets and in refinancing collapsing economies. This has been enabled by the use of shortage cuts in countries such as Portugal and her neighbor Spain.
This crisis will affect the financial landscape by bringing deficits in the financial sector. It will hamper the growth and development efforts across various countries in the Euro zone. Because of this trend, there is going to be a rise in the unemployment levels and inflation rates will be on the rise.
Eichengreen, B., 2002, The International Debt Crisis in Historical Perspective, MIT Press, Washington.
Manasse, P, and Schimmelpfennig, A, and Roubin, N., 2003, Predicting Sovereign Debt Crisis, International Monetary Fund.
Khamful, Y, Chirwa, E, and Mlachila. M, 2006, Donor Herding and Domestic Debt Crisis,
Issues 2006-2109. International Monetary Fund. Read More
Cite this document
  • APA
  • MLA
(“European Sovereign Debt Crisis Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
European Sovereign Debt Crisis Essay Example | Topics and Well Written Essays - 500 words. Retrieved from
(European Sovereign Debt Crisis Essay Example | Topics and Well Written Essays - 500 Words)
European Sovereign Debt Crisis Essay Example | Topics and Well Written Essays - 500 Words.
“European Sovereign Debt Crisis Essay Example | Topics and Well Written Essays - 500 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF European Sovereign Debt Crisis

S&T Debt Factors

The agreement contains a credit default contracts that include credit default swaps, default index contracts, credit default options, and credit default basket options. One can use these as part of the mechanism that is collateralized by debt obligations. The goal should be to establish a price for a given risk and controlling credit based on risk. The credit can be allowed by minimization of risk. Credit controllers should develop versatile tools that transfer risk away from a lender’s balance sheet.
d) With reference to the proposed debt counseling business, illustrate and explain exactly how you would organize the debt counseling operation, taking particular care to explain how and when you would receive payment for...
6 Pages(1500 words)Case Study

Fundamental Rights of Primary European Union Legislations

Fundamental rights had been traced to several ancient documents which date signify that even in those ancient eras fundamental rights had already been practiced and recognized and that the concept was alive and respect for such rights existed thousands of years ago. The Cyrus Cylinder which can be found in the British Museum in London shows that during 539 BC, Cyrus the Great of Persia believed in the fundamental human rights of his own citizens as well as captive citizens of Babylonia which he conquered in 539 BC. The Cyrus Cylinder was actually Cyrus’ declaration of reforms and described how Cyrus repatriated displaced peoples such as the Jews who were deported and exiled by the Babylonian king Nebuchadnezzar in 6th centur...
66 Pages(16500 words)Dissertation

The Effects of Financial Crisis on Supplier Selection Criteria of the Oil and Gas Industry Equipment Market

It is a difficult task to find those vendors who not only have the adequate quality and quantity of the needed raw materials but who also have an attitude of efficiency and display commitment to customer service (Sonmat, 2006). Further, organizations also strive to locate and select vendors who can be depended upon for long term relationship.

The number of factors or attributes desired from the vendor is vast, and different organizations and different industries place different importance on the attributes (Sonmat, 2006). Some of the vendor attributes may gain importance owing to the nature of the industry, for example, in the case of consumer perishables suppliers, like fresh vegetables or fruits, the buying firm would...
20 Pages(5000 words)Literature review

Bernard Madoff : A Scapegoat of the Economic Crisis

Darwin was condemned and treated with contempt by the Church for proposing the theory of evolution that linked all living matter in the earth, including humans. In the case of Bertrand Russell, he was imprisoned as a conscientious objector, for expressing his opposition to British participation in the First World War. These are typical examples of people being wrongfully punished when they were guilty of no crime or fraud or misdoing. It would be highly improper to associate Bernard Madoff with the aforementioned luminaries, for he was truly guilty of carrying out the biggest financial fraud in modern history. At the same time, it would be simplistic to classify him as a victim of the contemporary judicial system. The truth, in fa...
6 Pages(1500 words)Assignment

The Study of the European Consumer

The focus will be on Europe and the consumer.
This paper will rely mostly on secondary sources for data collection purposes as well as to make a comment and discussion on the issue. The research journals will be surveyed to provide a clear and concise discussion whereas the results will be obtained from the secondary sources published mostly on the internet. For this purpose, the use of databases such as Euromonitor as well as newspapers and magazines’ websites will be surveyed in order to obtain the desired information for analysis purposes. It is also critical to note that some of the trends to be obtained will be analyzed in the larger context of Europe and its linkages with other international markets.

6 Pages(1500 words)Research Proposal

European Union Policy: Turkey

...Running Head: European Union.... Topic: European union policy Order#: 377392 Topic: European union policy Profile of Turkey-history, geography and population: “Area: Approx 780,000 sq km (300,000 sq miles) Population: 71.9m (July 2008 est) Capital city: Ankara People: Majority Turks. Minorities recognised under the Turkish Constitution: Jews, Armenians and Greeks. Other ethnic peoples include Kurds, Circassians and Bosnians. Language: Turkish (official), Kurdish Religion: Muslim Currency: Turkish Lira (TL) Government: Parliamentary republic. Membership of international...
9 Pages(2250 words)Case Study

Global Employee Information and Consultation: Replicating the European Model

...Global Employee Information and Consultation: Replicating the European Model INTRODUCTION The only way for the employees and their representatives to reach the level of multinational corporations is to create an effective transnational mechanism that facilitates consultation and information disclosure. The European model (EWC) is an example of an institution that intends to provide employees voice in the transnational arena. The information dissemination and consultation arrangement enable employee representatives to participate in discussing issues that pertains to their employment. However, there is a need to analyze whether EU style of legislating a mechanism shall be effective if replicated globally. The answer in part depends...
9 Pages(2250 words)Coursework

How Developing Economies Are Impacted by the Global Financial Crisis

The global financial crisis which started from the United States emerged
because of the diversified risk, in which the supply of capital to real economies is reduced as a result of freezing up of capital markets and the collapse of financial institutions.
Before coming to the current financial global crisis, knowing how a crisis occurs is also important. An economic crisis is simply known as the decline in economic activity for a few months in an economy. The typical measure which shows the decline in the activity of the economy is the decline in Gross Domestic Product or a negative real economic growth rate. When a recession remains for a longer period, it is known as economic depressio...
20 Pages(5000 words)Research Proposal

Main Trends of Neoliberalisation in European Cities

The author mentions in this regard to the revolution in Paris, which gave birth to the Second Empire under Napoleon Bonaparte. Harvey (2008) observes that the revolution caused due to surplus capital and labor paved the way for infrastructural development throughout Europe, which created roads, railway networks, and harbors.
Brenner and Theodore (2002) observe that the combined effects of growth capital and labor relations, competition between the capitalist regimes, financial and fiscal regulations, power of the state and a move to become international paved the way for neoliberalism during the 1980 period. To this extent, Brenner and Theodore (2002) and Peck and Tickell (2002) states that the urban hemisphere is becoming t...
7 Pages(1750 words)Literature review

Capital Market and Financial Crisis

During late 2007, a massive economic recession hit the entire world and most of the countries have experienced its negative consequences. The recession can also be termed as a financial crisis because, during the recession period, the affected economies suffered from a lack of necessary finance or credit crunch.

During late 2007, a massive economic recession hit the entire world and most of the countries have experienced its negative consequences. The recession can be identified by decreasing GDP and industrial production and increasing unemployment. In such situations, the regulators of economy, formulate and implement effective policies to overcome recession as soon as possible. In this respect, the regulator of the c...
6 Pages(1500 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic European Sovereign Debt Crisis for FREE!

Contact Us