The European sovereign debt crisis Essay Example | Topics and Well Written Essays - 1500 words

The European sovereign debt crisis - Essay ExampleIt was found that from 2009 onwards, some countries in the EMU wish well Spain, Portugal and different countries in the similar zone, were not able to refinance the debts incurred by the government. This crisis in some of the countries in the EMU had a spill-over effect and had generated an economic scarcity in most of the coeval economies in the world. The essay in this context desires to throw light on how the crises in some of the economies in the EMU were responsible for the massive and deadly monetary crisis in the financial markets of the whole European sum (Ross, 1979). Crisis in a Small Economies Triggered a Large Impact The economies in the contemporary world live become exceedingly integrated in nature after the emergence of globalization and liberalization. The debt crisis that was initially face up by the public authorities in a few small economies in the Euro zone same Spain, Greece etc were responsible for the o ccurrence of the Sovereign Debt Crisis for the whole European Continent. The Property Bubble that occurred in Spain long hazard in 2007 was largely responsible for the occurrence for the recession in the European scrimping at the last mentioned stage. It was found that after a long term sustainable growth, the Spanish economy had become highly unproductive in nature. The entrepreneurs started to invest more in the real estate sector. However, it was found that the prices of the properties constantly change magnitude in the economy because real estate barter was used for speculative purposes in the Spanish economy. Ultimately, this caused a fall in the disposable income of the individuals who had to purchase houses at very high prices. The number of the failed projects in the economy started to increase. All the other economic indicators like the government debt, exchange rates, velocity of money circulation, derivative trading etc became worse in the economy at this point of ti me. As the countries used to follow the regime of dictated policies, the recession in one particular economy had largely triggered the same in other economies in the Euro zone. Greece was one of the poorest nations that had remained in the Euro Area. The government of the country took large amount of loans from the ECB for mitigating the requirements if the expansionary fiscal policies. However it was a takings of concern that the government of the country could not pay back the loans to the ECB. This was the reason for the huge fiscal famine in the country. Fiscal deficit in the nation contagiously affected the supply of money in the economy. Thus during 2005 and 2009, some countries which were indeed small economies like Spain, Italy, Greece, Portugal etc. had to face severe financial crisis for reasons like property bubble, high fiscal debt or lack of productivity. Since all the nations in the Euro zone were integrated unneurotic in terms of the monetary policies taken for th em, the crisis in some of the economies soon triggered the same in other economies in the European Continent and generated the severe Sovereign Debt Crisis in the country (Klann, 2007). Impact in the financial commercialise The financial market in the Euro zone was distressed after the occurrence of the Sovereign Debt Crisis. The cruelness of the recession caused in the economy has not been completely recovered from even at this juncture of time. Derivatives Market During the Sovereign Debt Crisis, the European economy faced severe financial crisis. The number of failed out financial projects were excessive. The general productivity of the economy had fallen to a