European Commission  Legend: Current EU rules do not allow member governments to bailout insolvent banks by creating "bad banks" to hold their nonperforming loans. In light of a common euro currency, however, such adjustments are not possible. In the meantime, the next European financial crisis is inexorably building.
To fight the crisis some governments have focused on raising taxes and lowering expenditures, which contributed to social unrest and significant debate among economists, many of whom advocate greater deficits when economies are struggling. This counted as a "credit event" and holders of credit default swaps were paid accordingly.
The EU responded to the crisis by implementing a series of financial support mechanisms, such as the European Financial Stability Fund and the European Stability Mechanism, to provide emergency loans to those countries most affected by skyrocketing interest rates.
The figure was measured to In the case of Cyprus, the EU introduced a new concept, the "bail-in" as opposed to the "bail-out.
Together these three international organisations representing the bailout creditors became nicknamed "the Troika ". First, by creating a back-up fund, named Atlante, to bailout insolvent banks. Alternatively, borrowers can buy euros at whatever market rate is established, and pay back their loans but end up being saddled with much higher loan balances denominated in the new currency.
The states that were adversely affected by the crisis faced a strong rise in interest rate spreads for government bonds as a result of investor concerns about their future debt sustainability.
When, as a negative repercussion of the Great Recession, the relatively fragile banking sector had suffered large capital losses, most states in Europe had to bail out several of their most affected banks with some supporting recapitalization loans, because of the strong linkage between their survival and the financial stability of the economy.
Currently, it can take as long as 15 years to repossess a property. Greek protests against austerity programs, May 25, Looking at short-term government bonds with a maturity of less than one year the list of beneficiaries also includes Belgium and France.
Without an apparent solution in sight, the EU has been content to deal with each successive crisis as it comes up and postpone dealing with the long-term problem. The only alternative is either a painful structural reform, as Greece has been forced to attempt as a condition of its bailout, or an exit from the common euro currency.
The annual budget deficit and public debt both relative to GDP, for selected European countries. Finally, the Italian government has introduced legislation to streamline the process of foreclosing on bankrupt properties.
The one exception has been the tiny island of Malta, also a EU member, whose booming economy has not been affected by the problems of its Mediterranean neighbors. In the eurozone, the following number of countries were: Depositors and creditors must now write-off eight percent of their claims before public funds can be used to recapitalize a failing bank.
This has also greatly diminished contagion risk for other eurozone countries. In September the Swiss National Bank surprised currency traders by pledging that "it will no longer tolerate a euro-franc exchange rate below the minimum rate of 1.
The bond plan skirts the EU prohibition on bailing out banks, and may yet be challenged by the EU.European Commission Directorate-General for Economic and Financial Affairs Economic Crisis in Europe: Causes, Consequences and.
The European debt crisis (often also referred to as the Eurozone crisis or the European sovereign debt crisis) is a multi-year debt crisis that has been taking place in the European Union since the end of All the day’s economic and financial news, including growth figures from two of the world’s largest economies Nils Pratley on finance Italy's eurozone crisis: no easy fixes for the.
Aug 30, · At a time of mounting uncertainty in Europe, the country has defied critics who insisted on austerity as the answer to the Continent’s economic and financial crisis.
By LIZ ALDERMAN July 22, Aug 13, · European stocks failed to shrug off jitters by Monday's close, as Turkey's worsening economic crisis prompted investors to offload riskier equities and flee to Author: Sam Meredith.
A new financial crisis is brewing in Europe, one that will prove as devastating as the last economic crisis.
This one will also be centered in southern Europe--only this time, instead of .Download