Paradigm Lost the Euro in Crisis - Term Paper Example

The Maastricht Treaty laid the foundation of the fiscal union and was also about the adoption of the Euro. The treaty eventually bounded all the monetary policies & currencies to bring it under one single roof. This included countries such as GIIPS (except Greece), countries with stable and largest economies and also the nations of northern Europe with a successful economy. The northern European members such as Germany, Belgium, Austria, France, and the Netherlands expected that the economy will diffuse throughout the whole periphery.

The members of EUN also thought that their economies will prevail over the economies of GIIPS. Averaging the public borrowings costs and the inflation levels for the period of 1980 to 1990, the GIIPS (except Greece) witnessed that their interest rates and inflation congregate with the EUN in the year 1990 (“Europe’s Debt Crisis: More Than a Fiscal Problem”). The Mauritian financial system was affected by a major outside factor and this time it is the financial crisis in Europe or popularly known as the Eurozone Crisis.

The European sovereign debt crisis or popularly known as the Euro Crisis is an ongoing financial emergency that has caused difficulties for a number of countries from Europe in refinancing the debt of their Government (Khan). The situation got worse to such extent that without the assistance of any third party it will be impossible for the respective Governments to repay their debts. In Europe, there are 17 countries that use the euro as their official currency (“Frequently Asked Questions about the Euro currency”).

However, during the establishment of the common currency, a number of scholars warned that, during an emergency, the euro may cause huge difficulties. The fear of European crisis developed among the investors in the year 2009 when they identified increasing government and private debts globally.