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 want Spain, Portugal and other countries in the similar zone, were not able to refinance the debts incurred by the political sympathies. This crisis in some of the countries in the EMU had a spill-over put and had generated an economic scarcity in most of the contemporary 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 financial crisis in the financial markets of the whole European Union (Ross, 1979). Crisis in a Small Economies Triggered a macroscopical Impact The economies in the contemporary world have become highly integrated in nature after the emergence of globalization and liberalization. The debt crisis that was initially go about by the public authorities in a few small economies in the Euro zone like Spain, Greece etc were responsible fo r the occurrence of the self-governing Debt Crisis for the whole European Continent. The Property Bubble that occurred in Spain long back in 2007 was mammothly responsible for the occurrence for the recession in the European economy at the latter(prenominal) 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 increased in the economy because real estate trading 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 time. As the countries used to follow the regime of glacial 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 matter 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 deficit 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 intense 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 f or them, 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 Market 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 overall productivity of the economy had fallen to a