What is the European debt crisis and why is it important?
The European debt crisis (often also referred to as the Eurozone crisis or the European sovereign debt crisis) is a multi-year debt crisis that has been taking place in the European Union since the end of 2009.
Will Greece and Italy’s debt crisis threaten the European banking system?
The debt problems in Greece and Italy are threatening to spill over into the European banking system. According to the IMF, European banks face a €200 billion credit risk stemming from direct exposure to government debt issued by Greece, Portugal, Ireland, Spain, Italy and Belgium.
How unpredictable is the euro crisis?
The current sovereign debt crisis in the euro area has shown a similar degree of unpredictability. When a small euro area country got into difficulties, others were gradually affected, according to the depth of correlation between their domestic markets and financial instruments. Contagion is very difficult to anticipate.
How has the European financial crisis affected the global economy?
Simply put the financial crisis of the European states has impacted the financial condition of European banks and all holders of European debt wherever they are located, and this negative reaction had impacted all of Europe and the global economy.
How much did the 2011 EU bailout Save Ireland?
In July 2011, European leaders agreed to cut the interest rate that Ireland was paying on its EU/IMF bailout loan from around 6% to between 3.5% and 4% and to double the loan time to 15 years. The move was expected to save the country between 600–700 million euros per year.
When did the eurozone countries exit the second bailout?
In March 2012, Greece received its second bailout. Both Spain and Cyprus received rescue packages in June 2012. Return to economic growth and improved structural deficits enabled Ireland and Portugal to exit their bailout programmes in July 2014. Greece and Cyprus both managed to partly regain market access in 2014.
How much did the EU bailout of 2010 save the Euro?
This followed a bailout in May 2010, where EU leaders and the International Monetary Fund pledged 720 billion euros (about $920 billion) to prevent the debt crisis from triggering another Wall Street flash crash. 8 The bailout restored faith in the euro, which slid to a 14-month low against the dollar. 9
Does the eurozone’s governance construction exacerbate macroeconomic divergence?
Imperfections in the Eurozone’s governance construction to react effectively exacerbated macroeconomic divergence. Eurozone member states could have alleviated the imbalances in capital flows and debt accumulation in the South by coordinating national fiscal policies.
Will the Eurobonds lead to higher interest rates?
By competing with Treasurys, the Eurobonds could lead to higher interest rates in the U.S. If those countries had defaulted, it would have been worse than the 2008 financial crisis.