European Sovereign Debt Crisis
Following the US financial crisis in 2008, fears of a sovereign debt crisis developed in 2009 among fiscally conservative investors concerning some European states, with the situation becoming particularly tense in early 2010. This included eurozone members Greece, Ireland and Portugal and also some EU countries outside the area. Iceland, the country which experienced the largest crisis in 2008 when its entire international banking system collapsed, has emerged less affected by the sovereign-debt crisis as the government was unable to bail the banks out. In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany. To be included in the euro zone, the countries had to fulfil certain convergence criteria, but the meaningfulness of such criteria was diminished by the fact they have not been applied to different countries with the same strictness.
According to the Economist Intelligence Unit in 2011, "f the is treated as a single entity, its position looks no worse and in some respects, rather better than that of the US or the UK" and the budget deficit for the euro area as a whole is much lower and the euro area's government debt/GDP ratio of 86% in 2010 was about the same level as that of the US. "Moreover," they write, "private-sector indebtedness across the euro area as a whole is markedly lower than in the highly leveraged Anglo-Saxon economies." The authors conclude that the crisis "is as much political as economic" and the result of the fact that the euro area lacks the support of "institutional paraphernalia (and mutual bonds of solidarity) of a state".
The crisis continued with S&P downgrading nine euro-area countries, including France, then downgrading the entire European Financial Stability Facility (EFSF) fund.
In May 2012, socialist François Hollande was elected as president of France and a month later the French socialist legislative position was strengthened, while German leader Angela Merkel "has appeared to be floundering and been badly let down by her advisers in recent months", one commentator said. As such, "serious discord between French and German monetary decision-makers was ... 1992–93, at the height of the crisis over the European Monetary System, the forerunner to EMU" (European Monetary Union). "itherto relatively dormant signs of euro skepticism in German public opinion and throughout industry have been multiplying in recent months, making Hollande’s proposals increasingly unpalatable to a broad swathe of German opinion. Although considerable controversy will continue to swirl over Greece and Spain, the real battle lines over the future of the euro will be drawn up between Germany and France," the commentary concluded. Another historical parallel – to 1931 when Germany was burdened with debt, unemployment and austerity while France and the US were relatively strong creditors – gained attention in summer 2012 even as Germany received a debt-rating warning of its own.
Read more about this topic: Euro
Famous quotes containing the words european, sovereign, debt and/or crisis:
“So in Jamaica it is the aim of everybody to talk English, act English and look English. And that last specification is where the greatest difficulties arise. It is not so difficult to put a coat of European culture over African culture, but it is next to impossible to lay a European face over an African face in the same generation.”
—Zora Neale Hurston (1891–1960)
“Before he left, Aunt William pressed a sovereign into his hand guiltily, as if it were conscience money. He, on his side, took it as though it were a doctor’s fee, and both ignored the transaction.”
—Ada Leverson (1862–1933)
“Man’s pity for himself, or for his son,
Always premising that said son at college
Has not contracted much more debt than knowledge.”
—George Gordon Noel Byron (1788–1824)
“What happens in a strike happens not to one person alone.... It is a crisis with meaning and potency for all and prophetic of a future. The elements in crisis are the same, there is a fermentation that is identical. The elements are these: a body of men, women and children, hungry; an organization of feudal employers out to break the back of unionization; and the government Labor Board sent to “negotiate” between this hunger and this greed.”
—Meridel Le Sueur (b. 1900)