by Mark Johnston
As the number of countries perceived as having major debt problems increases the euro crisis continues. The crisis is a complex tale of politics and economics.
The first country to fall in to crisis was actually Ireland and not Greece as many think. Since joining the euro governments such as Greece and Ireland have gotten use to spending a lot of money, they had a booming economy and while things were good this was not a problem.
Debt levels in these countries (amongst others) became unsustainable and they then received billions of euros in bailout aid from the European Commission, the International Monetary fund and the European Central bank, as it became too expensive for them to borrow cash on the open markets.
The final cost of the global crisis has been estimated at £3 trillion; therefore economies around the world fell in to recession and tax revenues collapsed.
The euro zone crisis has sparked several panics on global stock markets.
Although throughout all this one country in particular has managed to keep its head above water,Germany. This country has Europe’s largest population, economy and the healthiest government finances; it is the ‘powerhouse’ of the euro zone.
It is no wonder then that other members of the euro zone look to them for help. However, the people of the country do not want to spend their hard earned cash bailing out the weakest links in the Euro.
Many experts believe that those countries with such different sized economies simply can not carry on sharing the same currency.
At the moment there are a few possible scenarios that could end the European debt crisis such as:
Nothing changes and the euro zone carries on as it is: this option is favoured by most politicians; the hope is that the stronger nations will come to the rescue of the weaker ones.
A limited break up of the Euro: the weaker countries would leave the euro zone and issue their own currencies again. Although the problem with this is that already weakened countries that do leave would face greater risks of economic collapse.
A substantial beak up: this option would mean that not only would the weakest nations leave the Euro but so would a couple of large countries, thus leaving only the strongest nations. This would be tough forEuropeas a whole to recover from.
A full break up: this would mean that every nation in the Euro zone would go its separate way and re-issue its old currency. This option however, would lead to widespread chaos and economic panic.
The single currency took years in planning and the Euro, according to some, assures peace and joint prosperity throughoutEurope. Therefore most politicians in the Euro want it to stay together, however only time will tell.
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