Describe the how the European Debt crisis came about. What has been some of the outcomes...

Describe the how the European Debt crisis came about. What has been some of the outcomes of the European Debt crisis.

Expert Solution

Firstly, there were no penalties for countries that breached the debt-to - GDP ratios set by the Maastricht Criteria founding the EU. This is because France and Germany were also spending above the limit, and sanctioning others would be hypocritical until they got their own houses in order. There was no teeth in any sanctions except expulsion from the eurozone, a harsh punishment that would weaken the euro 's power itself. The EU was looking to boost the influence of the euro.

Second, eurozone countries benefited from the euro's power. They enjoyed the low-interest rates and increased investment capital. Most of this flow of capital was from Germany and France to the southern nations, and this increased liquidity raised wages and prices—making their exports less competitive. Countries using the euro couldn't do what most countries do to cool inflation: raise interest rates or print less currency. During the recession, tax revenues fell, but public spending rose to pay for unemployment and other benefits.

The UK and many other EU countries that do not form part of the eurozone balked at Merkel 's deal. They worried that the treaty would bring in a "two-tier" EU. Eurozone countries could only create preferential treaties for their members and exclude the non-euro EU countries.

Countries in the eurozone must agree to budget cuts which could delay their economic development, as they have in Greece. Those austerity measures were unpopular politically. Voters could vote in new leaders who might exit either the eurozone or the EU itself.

Rahul Sunny answered 1 year ago

Describe how the European debt crisis evolved.

describe the main issues of the European debt crisis

Leading commentator shave argued that the European Debt Crisis has been particularly damaging for the “European...

Leading commentator shave argued that the European Debt Crisis has been particularly damaging for the “European Periphery” (e.g. Spain, Italy, Greece) because of their adoption of the Euro (common currency). Briefly sketch out the trade-offs involved in adopting a common currency. What are the main economic considerations that weigh on these costs and benefits?

Leading commentators have argued that the European Debt Crisis has been particularly damaging for the “European...

Leading commentators have argued that the European Debt Crisis has been particularly damaging for the “European Periphery” (e.g. Spain, Italy, Greece) because of their adoption of the Euro (common currency). Briefly sketch out the trade-offs involved in adopting a common currency. What are the main economic considerations that weigh on these costs and benefits?

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?

1 Briefly describe BREXIT, how it came about and its likely future. 2 What is the...

1 Briefly describe BREXIT, how it came about and its likely future. 2 What is the likely impact of BREXIT for American-based companies doing business in Britain? 3 What opportunities are likely to come about as a result of BREXIT?

During the European debt crisis in 2012, an article in the Wall Street Journal noted: “The...

During the European debt crisis in 2012, an article in the Wall Street Journal noted: “The cost of credit default swaps on Italian and Spanish government and corporate debt surged last week. ” What does an increase in the price of CDS on Italian and Spanish government and corporate bonds indicate about the bonds? What likely happened to the yields on those bonds?

What was the greek debt crisis and factors triggered this crisis

In short, please describe the main proposals for dealing with the European migration crisis (as of...

In short, please describe the main proposals for dealing with the European migration crisis (as of 2015).

1. The Argentinian crisis of 2001 was brought about by: a. debt crisis. b. exchange rate...

1. The Argentinian crisis of 2001 was brought about by: a. debt crisis. b. exchange rate crisis. c. excessive loss of national resources. d. None of these statements is true. 2. The type of good with the smallest trade deficit in the U.S. based on data from 2016 is: a. foods, feeds, and beverages. b. capital goods. c. industrial goods. d. automotive goods. 3. For nearly every year since 1970, the United States has a. imported more than it exported....

Question