Why are current account Imbalances the key source of many macroeconomic Crisis, e.g. european Sovereign debt...

Why are current account Imbalances the key source of many macroeconomic Crisis, e.g. european Sovereign debt Crisis. Can someone explain this thoroughly please?

Expert Solution

A sovereign debt crisis is called that when a country unable to pay debut. whose country called Sovereign debt crisis. but it does not accure in a one day or one week. ts gave many warning also gave a sign to debt.country ignore for a own benifeits.that process not a one day process that ole thing occure slowly and slowly.

This happens when pepole realize tat the Greece going own debt in 2009. thats time european is works good , but condition became wrost,in several county,debt are arising for a property transferd to sovereign debt as a result of a banking system baiout.so goverment gave a slow responses. Five countries -Portugal, Italy,Spain, Ireland, Greece are failed to make a good economic growth .so in 2008-2009 fall all rates those rates depend a country GP ratio like a housing rate and parallely increasses of debt.

Thats time Eurozone country facing a big problem because those time debt problem were also generally uncompettitve with heigher inflaction rate,and also incessing a labour cost soo the export become less demanding to lower economic growth. in case no lander make a market with the Eurozone. Eurozone held a nervouse debt become.Fears of default raise bond yeilds, but this made it more expensive to pay intrest on debt .Cost of debt were increses in coming year Those country were not a part of Eurozone those country not in a present a markel treaty.these country worreid treaty would lead to second Eurozone The second Eurozone country agreed to cut spending which a further effected potential growth. Thats things led to rise a global risk aversion.so its simply say that European sovereign debt crisis was a period when many European country realize financally insititution, high debt rate and less demand in export.

Rahul Sunny answered 1 year ago

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