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European Sovereign Debt Crisis

Currently many European Nations, especially the PIIGS [Portuagal, Ireland, Italy, Greece and Spain] countries have a Sovereign Debt problem.

A. What are the ultimate causes for the current crisis?

B. What are the potential implications of this problem for Euro-Currency and European Monetary Integration.

C. What are the Implications of this problem for USA?

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Dear Student,

A. Causes of European Sovereign-Debt Crisis

There are several causes of European Sovereign-Debt Crisis. For instance, international trade imbalances such as: real-estate bubbles and monetary policy inflexibility are the ultimate causes for the current crisis. Along with this, structural problem of Eurozone system, rising household & government debt levels and loss of confidence are the other reasons of European Sovereign-Debt Crisis (Arezki, Candelon & Amadou, 2011). In several countries, it also contributed due to private debts arising from a property bubble. For example, in Greece, the main causes of this crisis are lots of overspending of money and little economic production (Posner, 2010).
The monetary structure of the Eurozone without including different tax and public pension rules is another reason of this crisis. On the other hand, easy credit conditions during the 2002-2008 period is also a main cause of European Sovereign-Debt Crisis period, because it encouraged ...

Solution Summary

European sovereign debt crisis is examined. The ultimate causes for the current crisis is examined.