Consider the European sovereign debt crisis. In 2011, many countries in the European markets were suffering...

Consider the European sovereign debt crisis. In 2011, many countries in the European markets were suffering through a sovereign debt crisis which impacted multiple nations (Greece, Spain, Italy, Ireland, Portugal). What were some of the causes and how did countries respond to this crisis?

Expert Solution

Answer :-

1) The European debt crisis has been taking place in the European Union since the end of 2009. And affect serval countries like Greece, Portugal, Ireland, Spain and Cyprus.

MAIN CAUSE OF THIS CRISES

2) The eurozone crisis resulted from the structural problem of the eurozone and a combination of complex factors.

3) There is a consensus that the root of the eurozone crisis lay in a balance-of-payments crisis. Means, a sudden stop of foreign capital into countries that were dependent on foreign lending.

4) And that this crisis was worsened by the fact that states could not resort to devaluation of their currencies.

5) Other important factors include the globalisation of finance, easy credit conditions that encouraged high-risk lending and borrowing practices.

6) and others are the financial crisis of 2007–08; international trade imbalances; real estate bubbles that have since burst is the main reasons for european sovereign debt crisis.

COUNTRIES RESPOND TO THIS CRISES

7) To given direct loans to banks and banking regulation.

eurozone leaders agreed to permit loans by the European Stability Mechanism to be made directly to stressed banks rather than through eurozone states, to avoid adding to sovereign debt.

The reform was immediately reflected by a reduction in yield of long-term bonds issued by member states such as Italy and Spain and a rise in value of the Euro.

8) Less austerity, more investment in the key point to respond this crisis.

9) increase competition, no debt restructuring will work without growth, even more so as European countries.

10) and Mobilisation of credit.

Thank you.

ekkarill92 answered 2 years ago

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