The Eurozone Crisis is one of the most painful scenarios that Europe has had to put up with in a long period of time. The crisis can be defined as the shorthand term for the struggle that Europe has faced in trying to pay debts that it has built in the recent decades. Among the countries that make up the region, five; Greece, Ireland, Portugal, Spain and Italy have not been able to register enough economic growth to pay back the bond holders, the guarantee that they issued. The countries have huge longstanding debts in varying degrees. Besides, the reasons for these debts vary from one nation to another.
Even though these five states have been seen as the countries faced with immediate danger of default based on their economic status, the Eurozone Crisis has far more reaching implications that spread beyond their borders to even the whole world. According to the head of the Bank of England, the Eurozone Crisis is the most serious financial crisis that Europe has been faced with since the 1930s. It is one of the major problems that have so far placed the world economy at stake.
Since the United States’ financial crisis that took place between years 2008 to 2009, the world economy has experienced dismal economic growth. As a result of this, there has been an exposure of the unsustainable fiscal policies of states in Europe and so many more across the world. The first nation to feel the scorching heat of the weaker economic growth was Greece. Despite spending heartily for several years, it still did not manage to carryout fiscal reforms. One of the important facts that should be noted is that when there is slow growth, tax revenues also go through the same experience. As a result of this, high budget deficits become unsustainable.
Greece’s case was getting worse by the day and in 2009, it emerged that the nation’s debts were estimated to be even much more than its economy. This made the nation to begin soliciting for help publicly since there was every reason to believe that it had already got out of hand. In order to try and contain the situation, investors began demanding higher returns on Greece’s bonds. This helped is raising the debt burden on the nation and even facilitated bailouts by the European Central Bank and the European Union.
Based on the measures that have been taken to try and contain the crisis, there is now a lower chance of default or even exit of one of the countries affiliated to the Eurozone compared to the situation that was 2011. Some Southern states are already on the way to recovery but weakness is still experienced in the Northern states. A bigger problem still looms in Europe since the high debts by the governments are still in place. As a result of this, there are still fears of economic shock to not only the region but also the rest of the world. The economic shock might soon be experienced and might even spread over several years to come.