The Current Economic Crisis in Europe
MU
Kevin Jiang
Mun Huntington Beach
Dunkel
4/19/12
Topic II: Economic Crisis
Background:
The current economic crisis that exists in Europe and is of concern to the European Union can be traced to similar themes of other crises of the past. A crisis generally follows an economic boom where money and credit expand widely which leads to over-confident investors who spend more than they should. This over spending causes investors to sink in to substantial debt when they are forced to default on loans in order to remove themselves from the over-leveraged situation they have created. Several of the European Union member nations have been followed this pattern which has plunged Europe into the greatest economic crisis since the Great Depression. One factor that allowed this over-leverage to happen was the establishment of the Euro in 2002. This economic integration of Europe was an important goal for peace since the close of World War II and of the Maastricht Treaty (which created the European Union in 1992). The Euro is the common currency of 17 European nations known as the Eurozone, and with it member nations have access to large amounts of credit. Because of such easy access to credit, some nations ended up spending significantly more than was justified by their specific economy. This is exemplified by Greece, and was exacerbated when in 2007 they decided to try to hide their debt until by 2010 they had accumulated a debt of approximately €215 billion.
In response to the growing debt member nations were incurring, the European Union provided bailout plans to help liberate its members. To facilitate these plans the European Financial Stability Facility (ESFS) was created in 2010 in order to bail out countries with high debt. Some of the nations ESFS attended to included Ireland and Portugal whose indebtedness was greater than that of Greece. The last loans to be given were in December of 2011 with €3.7 billion allocated to Portugal and
Kevin Jiang
Mun Huntington Beach
Dunkel
4/19/12
Topic II: Economic Crisis
Background:
The current economic crisis that exists in Europe and is of concern to the European Union can be traced to similar themes of other crises of the past. A crisis generally follows an economic boom where money and credit expand widely which leads to over-confident investors who spend more than they should. This over spending causes investors to sink in to substantial debt when they are forced to default on loans in order to remove themselves from the over-leveraged situation they have created. Several of the European Union member nations have been followed this pattern which has plunged Europe into the greatest economic crisis since the Great Depression. One factor that allowed this over-leverage to happen was the establishment of the Euro in 2002. This economic integration of Europe was an important goal for peace since the close of World War II and of the Maastricht Treaty (which created the European Union in 1992). The Euro is the common currency of 17 European nations known as the Eurozone, and with it member nations have access to large amounts of credit. Because of such easy access to credit, some nations ended up spending significantly more than was justified by their specific economy. This is exemplified by Greece, and was exacerbated when in 2007 they decided to try to hide their debt until by 2010 they had accumulated a debt of approximately €215 billion.
In response to the growing debt member nations were incurring, the European Union provided bailout plans to help liberate its members. To facilitate these plans the European Financial Stability Facility (ESFS) was created in 2010 in order to bail out countries with high debt. Some of the nations ESFS attended to included Ireland and Portugal whose indebtedness was greater than that of Greece. The last loans to be given were in December of 2011 with €3.7 billion allocated to Portugal and