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EUROPEAN DEBT CRISIS
Transcript of EUROPEAN DEBT CRISIS
The European debt crisis is a multi-year debt crisis that has been taking place in the European Union since the end of 2009. Several eurozone member states were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision without the assistance of third parties like other Eurozone countries, the European Central Bank or the International Monetary Fund .
- control the money supply
- interest rates of borrowing money
- control how much money the government collects in taxes and how much it spends
How the crisis unfolded?
- Euro was born when European Union became a single economic zone.
- EU comprised of strong (Germany, France) as well as weak (Greece, Portugal) economies.
- Euro being the single currency in the union, there was no fear of local inflation, so banks lent indiscriminately.
- World economy was in good shape, so direct correlation between economic and repayment strength was not evident.
- Weaker economies of EU (PIIGS) overspent using borrowed money.
-Now they are unable to pay back their debt.
MONETARY POLICY VS. FISCAL POLICY
7 February 1992
Godfrey Bloom about the crisis