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Eurozone Subprime Crises Essay

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The Eurozone Sovereign Debt Crisis

Table of Contents

Executive Summary……………………………………………………………………………….1

Key Problems and Trends within the Eurozone
The PIGS: Overspending and Increasing Debt Burden…………………………………...3
Price-Asset Bubbles…………………...………….……………………………………….4
The Problem of the Hard Peg……………………………………………..……………….6
The Role of Credit in the European Financial Crisis………………….….……………….9
The Threat of Contagion
The Downward Spiral…………………………………………………………………....11
Effects on the Eurozone………………………………………………………………….13
Lack of Established Crisis Management System………………………………………...16
Policy proposals
Introduction……………………………………………………………………………....21
Regulating the Credit Boom……………………………………………………………..21
Strengthening the Role of ECB…………………………………………………………..24
Works Cited……………………………………………………………………………………...25

Executive Summary
In our policy paper, our main goal was to answer the ultimate question of why the Eurozone was so fragile when entering the European financial crisis. The core of this question alludes to not only the inherent instability of the Euro during times of crises, but also the unfavorable circumstances of the financial climate and the poor enforcement of Eurozone policies found leading up to and upon the implementation of this monetary union.
The first part of our paper describes the common problems and trends seen in some of the largest debtor countries in the EU, such as Greece, Italy, Portugal, and Spain (PIGS). Because they had more access to capital with the credibility of the single currency, governments started over spending and building up debt. Even though some countries’ debt levels were above the allotted limit, the financially stronger countries could not enforce these quotas because they also found themselves above the debt limit. Therefore, from the beginning, the guidelines that held the Euro together seemed to divulge from the financial reality of the Member States.
Eventually, this overspending led to major...

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Eurozone Subprime Crises. Anti Essays. Retrieved November 20, 2017, from the World Wide Web: http://www.antiessays.com/free-essays/Eurozone-Subprime-Crises-603695.html