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Over and above individual member perpetration to the crisis, the European region as a whole triggered the crisis. Exacerbated credit growth, low risk premia prevalence, liquidity abundance, and real estate bubbles are some of the major causes of the European financial crisis (European Commission 4). Other causes relate to the primary currency of the region; the Euro. Deteriorated euro value resulted in economic poor performance in key sectors of the European economy. As a result, recession scenario was looming, characterized by fluctuating business cycle. On the same note, the rush by financial institutions to safeguard their interests amid the economic downturn exacerbated the occurrence of the European financial crisis.
Parties responsible for the crisis spread across different sectors of the economy. These sectors and their relevant parties perpetrated the crisis in different ways. In the financial sector, financial institutions were primarily responsible. Commercial banks rushed to make windfall profits at a time when the euro was performing poorly in the money market. On the same note, these institutions sought to safeguard their business portfolio by being slow to adjust their operations in such a way that would ease pressure in the economy. The bid to secure business interests at the time when the economy was starting to decline in terms of performance plunged the region into a financial crisis.
In the government sector, central banks are primarily responsible. Central banks’ monetary and government spending decisions influenced interest rates negatively. Surging interest rates were realized even before the crisis exploded. Another aspect of responsibility in the government sector emanates from the fact that some European governments have defaulted debts (European Commission 9). Doing so has subsequently affected investments in the region to a point where financial crisis has been realized. The implication is that investors have to share in
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As the crisis is reaching a higher point, it is affecting countries other than the European countries as well. The following paper would take three recent articles into consideration which are somehow related to the European crisis and it would be evaluated how the concepts presented in the article relate to the concepts of macro-economics.
However, Wallison (2012, p. 71) expressed the view that “in a true sovereign debt crisis, a country cannot meet its debt obligations, largely because it does not have enough of the currency in which its debt is denominated.” The European sovereign debt crisis began in 2008 with the banking crisis in Ireland with the contagion of the crisis spreading out to Greece, Ireland and Portugal in 2009 (Investopedia 2012).
In seeking an answer to this question, this paper borrows heavily from the elements of the portfolio theory and the asset pricing. Matousek (2012) observes that the portfolio theory is a theory of finance that aims at maximizing the expected return of a particular portfolio risk, or effectively minimizing the risks associated with a particular portfolio.
The rapid and continuous expansion of the industry is evidenced by the fact that between the period lasting from 1966 to 2000, the market share of PepsiCo and the Coca-Cola Company, the two dominant players in the American beverage industry increased to 76 per cent in 2000 from 54 per cent in 1966.
What has been witnessed is a huge depreciation of public and private funds as well as reduced credibility of currencies such as the Euro among the members of the European economic bloc. Economic integration, particularly in Europe, has been faulted as one of
In other countries such as Greece, pension commitments and an unsustainable public sector wage led to a rise in the state’s debt. According to Van Den Noord (37), countries like Italy engaged in extravagant spending
he Greece deficit was the first explicit sign that the Euro-zone was facing and had been facing severe problems in their financial structure and regulations, and these problems would go on to affect all the nations in the European nations.
The European Sovereign debt crisis
In the month of September 2008, the largest investment bank is USA Lehman Brothers Collapsed and the crisis started to spread to rest of the world. In this situation, to help the banks from collapsing European govt. had