European Debt Crisis
Current European Debt Crisis
Since 2010 fears of a sovereign debt crisis also known as the “Euro Crisis” has developed in Europe having direct impact on countries such as Greece, Portugal, Ireland and more recently European giants Spain, Italy, and France. What is on hand for these countries is a serious economic crisis that could involve widespread defaults and or significant rises in inflation caused by toxic short-term loans. The surreal thought of an entire country defaulting, is becoming more of a certainty surrounding Ireland and Greece specifically. The European Union and European Central Bank are at a struggle to maintain balance with powers France and Germany attempting to carry the burden of the struggling nations; have now seen an increase in their own accumulated national debt and short-term bank loans that must be repaid in the next 24 months. The current state surrounding this crisis isn’t unmanageable, though without swift action and new policy implementing along with a creation of a new monetary fiscal operation, Europe maybe stretched into abandoning governing members of their Union, and possible abandonment of their currency. This current debt crisis surrounding Europe was due in part to European Central Bank’s installment of short-term loans and its false impression imposed on investors, those of which who were investors believed short-term loans to be more beneficial opposed to long-term papers. Originally, as noted within Peter Boone and Simon Johnson’s work entitled “Europe on the Brink” they note that, “Initially the Bank, treated all nations equally, regardless of their credit ratings, as a result, it became profitable for banks to buy short-term government papers and deposit that paper in the ECB in return for loans” (Boone and Johnson, pg. 2). After noting the desire for short-term paper, Boone and Johnson are quick to note three immediate risks surrounding these transactions. Firstly, the European Central Bank created government
Since 2010 fears of a sovereign debt crisis also known as the “Euro Crisis” has developed in Europe having direct impact on countries such as Greece, Portugal, Ireland and more recently European giants Spain, Italy, and France. What is on hand for these countries is a serious economic crisis that could involve widespread defaults and or significant rises in inflation caused by toxic short-term loans. The surreal thought of an entire country defaulting, is becoming more of a certainty surrounding Ireland and Greece specifically. The European Union and European Central Bank are at a struggle to maintain balance with powers France and Germany attempting to carry the burden of the struggling nations; have now seen an increase in their own accumulated national debt and short-term bank loans that must be repaid in the next 24 months. The current state surrounding this crisis isn’t unmanageable, though without swift action and new policy implementing along with a creation of a new monetary fiscal operation, Europe maybe stretched into abandoning governing members of their Union, and possible abandonment of their currency. This current debt crisis surrounding Europe was due in part to European Central Bank’s installment of short-term loans and its false impression imposed on investors, those of which who were investors believed short-term loans to be more beneficial opposed to long-term papers. Originally, as noted within Peter Boone and Simon Johnson’s work entitled “Europe on the Brink” they note that, “Initially the Bank, treated all nations equally, regardless of their credit ratings, as a result, it became profitable for banks to buy short-term government papers and deposit that paper in the ECB in return for loans” (Boone and Johnson, pg. 2). After noting the desire for short-term paper, Boone and Johnson are quick to note three immediate risks surrounding these transactions. Firstly, the European Central Bank created government