European Financial Crisis - Essay Example

EUROPEAN FINANCIAL CRISIS Causes of the European financial crisis in a nutshell The European financial crisis describes a situation in which countries have not been able to repay their debts without the assistance of other nations or international bodies such as the International Monetary Fund and the World Bank since the year 2009. One of the main contributing factors to European financial crisis is political conflict that has been witnessed in the Eurozone. There exist different political ideologies which differ sharply and affect the general economic conditions.

Some nations who that convey a lot of influence in the nation may dictate on the other nations on how to handle the situation. Some countries such as Germany have adopted a very firm position on how to handle the situation which does not go well with other nations who have a contrary opinion (Hummel, 2013).There has been a slow as well as indecisive response from the European decision-makers. The issues involve large number of nations with different divergent approaches towards solving the crisis which has contributed to slow pace of implementing the recommendations.

Germany insisted on the adoption of stern actions aimed at reducing the budgetary deficits based on the postponement of other solutions. The slow response by the leaders allowed the problem to spread from one nation to another and the condition worsened at every instance. Those responsible for the crisis in the financial sectorThose responsible for the crisis in the financial sector include the commercial banks that have continued to use more risky financial instruments that have led to banks becoming weak in the sense that they have to use their personal funds to finance their huge deficits rather than lending to other firms as well as households.

The crisis is due to the continued problems witnessed in the banking sector across the entire Europe. The banks have been deemed to be susceptible to the changes in the financial sector (Doyran, 2011).Those responsible for the crisis in the government sectorThe political class are responsible for the crisis in the government due to their hard and tough stance towards the coming up with solutions to the crisis. The political leaders are responsible for the violation of the set rules governing the operations of the European Union.

Countries including Greece and Cyprus did not reveal the actual data on their financial and economic status. The political leaders in the two countries were responsible for the condition. The political leaders of some European nations such as Germany are very reluctant towards the implementation of the strategies that have been passed through the European Union. Recommendations towards the fixing of the problemOne of the ways of solving the crisis is by creating a balance between the private sector and the public sector in terms of wealth ownership and creation.

There is need to fix the huge trade imbalance that is evident by the huge surplus of the upper block consisting of Germany and the lower block made up of Greece and Spain that incurs large trade deficits (Habermas, J., & Cronin, C. 2012).ReferencesDoyran, M. (2011). Financial crisis management and the pursuit of power American pre-eminence and the credit crunch. Burlington, VT, Ashgate. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=716561.Habermas, J., & Cronin, C. (2012). The crisis of the European Union: a response.

Cambridge, UK, Polity.Hummel, D. (2013). The euro financial crisis impacts on banking, capital markets, and regulation: Report of the international workshop in Potsdam on July 20/21, 2012. Potsdam: Univ.-Verl. **94058.