How has the debt problem in Europe envolved Essay

How has the debt problem in Europe envolved - Essay ExampleThe EU market was lending to Ireland, Greece and Portugal at a rate that was at par with the one offered to Ger many another(prenominal) in 2008. The assumption at this point in time being that the Euro could never at any one given point break up and as a result, each and every country within the contribution was taken to be as safe as Germany- which had been considered to be the safest. For a very long time, Germany benefitted from the Euro zone crisis. The country had very low interest judge that made it even easier for the establishment to borrow more, thus creating a demand for more personal loans. The European Commercial Bank (ECB) even purchased German government bonds. Germany was seen to be the safe haven in European economics. Interest rates in the country had been going down since the start of the first symptoms of the crisis (Broyer, Peterson and Schneider 2012, p.2). . This was a differentiate crisis how had the country performed before? Was it over heating? If no why? Following this assumption, Greece did accumulate almost 145% of its pull in domestic product (GDP) as gross debt, a figure that was by far beyond what the country was capable of producing within a period of about one year and six months. As the crisis was progressing into its third year, it was not clear whether or not it would culminate in bringing to an end the straightening out or further accelerate the continents six-decade progress toward slow but sure confederacy, as Europe staggered between the currencys (Euro) break up and the measurably stouter measures that would pave way for tighter semipolitical and fiscal bonds (Ernst & Young 2012, p.1). The move towards a single economic region, as adopted by the European Union in the unveiling of the Euro currency is certain by the optimum currency area theory. Presented by Robert Mundell, the theory outlines the features of a new currency developed after several currenc ies have merged. It deals with the currency of a region as opposed to that of a country a particular region, larger than a particular country has to share a currency (Mundell 1961, pp. 658). In essence, the theory seeks to set out the maximum number of currencies that can be used in one particular region. The theory has enabled the close study of the many economic features that are key pillars in monetary unions. What does the theory say should happen? In spring 2010, Greece was not in a position of acquire on the open markets at reasonably priced interest rates a bailout package amounting to 110 billion Euros was devised by the European Union, International Monetary line and the European Central Bank. As an act of pay back Greece was required to cut down on its public spending by a quantifiable amount. In May 2010, the European countries government leaders made an approval of a contingency fund totalling to 500 billion Euros for the Union at large. In November 2010, Ireland did w rack a banking crisis after the collapse of a housing bubble and was in receipt of a bailout amounting to 6 billion Euros. Portugal, on her side, received 78 billion Euros as a result of a long-term economic laggard (Wharton 2012,