European Debt

In the past few years, European debt has taken center stage. This refers to the money that is owed by sovereign nations within the European continent, and more specifically of nations who are in the eurozone, a union of 17 nations with one overarching central bank and one currency. The problem with European debt is that many nations and firms are intertwined, which leaves the entire continent vulnerable to shocks that might endanger Europe’s entire financial system while also affecting the global economy.

A phenomenon called the “European debt crisis” has surfaced in Europe following the global recession of 2008 and 2009. Countries such as Greece, Spain, Portugal, and Ireland have been bailed out by the European Central Bank (ECB). The main reason behind all this was bad debt carried by banks in those countries—or in other words, a credit or financial crisis. Mind you, the European debt crisis is still fully marching ahead and continues to take its toll on the economic progress of the region.

The ECB has tried multiple tools to contain the crisis, but it continues to fail. The bad debt carried by the European banks is still significantly high; lending has slowed down as well. Worst of all, the stronger nations in the region, like Germany and France, are facing slowdown due to the ongoing European debt issues.


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