Eurozone Crisis

The recession in 2008 shattered the United States putting the country in its worst economic and financial crisis since the Great Depression. Hundreds of banks failed and went bankrupt. The government had to bailout certain large banks and automobile companies simply because they were “too big to fail”. The crisis quickly spread over Europe and the rest of the world. Ireland, Britain and Spain suffered housing bubbles just as the US. The contagion had a hard hit on Europe’s financial system causing governments to seize or bail banks. While the US was slowly recovering after 2010, Europe’s crisis continued and even worsened but in a new direction (Vukovic).

The current Eurozone debt crisis was caused predominantly by fiscal policies of certain European Union countries, but the 2008 recession acted as a catalyst. The countries, which led to the crisis, were Greece, Spain, Portugal, Italy and Spain. When the housing bubble burst in Spain and Ireland, housing prices deteriorated and many jobs were lost in the construction field (Landler). The budget deficit and public debt became unsustainable after the increasing expenditures and decreasing revenues. Portugal had much expenditure in public projects, services and investment bubbles, raising its debt. Greece and Italy had very high public debt and corrupt politicians who cared more about their own interests than the well-being of the public. They used cheap international borrowing to fund their campaigns, and hire and increase the salaries of the workers to give the illusion of a high employment (Vukovic). The second reason of the cause of the debt crisis was the introduction of the euro. The common currency eased trade and capital flows between Eurozone countries. It became easier for the peripheral countries to borrow in the international market turning their current accounts into deficits. The 2008 financial crisis in the US was the last piece, which set the beginning of the European sovereign