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The critical issues that shaped the crisis include; competitive weakness, weak and actual growth and large debt-to-GDP ratios. Other important issues are liquidation of banks and sovereigns, considerable liability stocks both in private, government and non-private sectors (Arestis & Sawyer, 2012). The crisis was complicated making it difficult for European nations to refinance or repay the debts of their governments without the intervention of a third party such as IMF or ECB. In addition, the banks within the Euro zone were undercapitalized and, as a result, were influenced by debt problems and liquidity.
Due to the crisis, the rate of economic growth was slow in the entire region. Similarly, the economic growth was unequally distributed across the member states (Lynn, 2011). The governments of the nations that were ruthlessly affected coordinated with "the troika". The troika is a committee formed by three international organizations namely, the European Central Bank, the European Commission, and the International Monetary Fund.
Virtually, in 1992 the EU signed the Maastricht Treaty. The agreement regulated their debt levels and the limit deficit spending. Nonetheless, at the onset of the year 2000, some of the member states defied the criteria of the treaty. These countries instead decided to analyze government revenues to minimize their deficit or debts. Therefore, evading the desired practice and not being able to follow the international standards (Arestis & Sawyer, 2012). This gave the sovereigns a chance to mask their deficit and debt levels by embracing a combination of approaches such as off-balance-sheet transactions, inconsistent accounting and the use of complex credit derivatives, as well as currency structures. The low-interest rates resulted to excessive government spending and borrowing primarily in member states like Greece during the decade lead.
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It had dwindling rate of economic growth following this period globalization. However, the country intensified in propulsion of relevant aspects that would capacitate it to recover from the economic situation that also affects the balance of payment (Pinder and Usherwood, 2007: 57).
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.
The sovereign Crisis began because of the dysfunction of the monetary union of the states within the Eurozone in addition to the politicizing of the economic control in Europe. The Impact of the European Sovereign Debt Crisis includes the reduction of the bond yield in the United Kingdom.
The crisis was preceded by clement fortunes of low risk premia, rapid growth in credit, abundant liquidity and growth in real estate bubbles (Jackson 1). Many financial institutions in Europe were rendered susceptible to asset market corrections by overstretching leveraging position.
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).
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.
Economic hardships in member countries translated to the crisis that the Eurozone experienced. For instance, Greece overstated its economic status in the zone, making the country live in a means that was way much higher than its actual
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
The economy of Europe is in its deepest and dire recession for the first time since the 1930s. It is an ongoing economic crisis that has made it difficult and nearly impossible for certain European countries to experience economic growth, finance their budgets, and re-finance their debts without seeking the assistance of other parties.
e governments of the few countries, notably Greece, Ireland and Portugal to address the financial debt crisis dating back to the year 2000 eventually became the major cause of the European sovereign debt crisis (Beirne and Fratzscher, 77). However, the major question that
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