European Debt Crisis Essay
Europe's debt crisis is a continuation of the global financial crisis and also the result of how Europe attempted to solve the global financial crisis that brought an end to a decade of prosperity and unrestricted debt. European attempts at defending itself against a deep recession, has now created a new crisis of unsustainable and un-serviceable sovereign debt. In early 2010 fears of a sovereign debt crisis, the 2010 Euro Crisis developed concerning some European states including European Union members Portugal, Ireland, Italy, Greece, Spain,(affectionately known as the PIIGS) and Belgium. This led to a crisis of confidence as well as the widening of bond yield spreads and risk insurance on credit default swaps between …show more content…
Greece’s reliance on external financing for funding budget and current account deficits left its economy highly vulnerable to shifts in investor confidence. Although the outbreak of the global financial crisis in fall 2008 led to a liquidity crisis for many countries, including several Central and Eastern European countries, the Greek government initially weathered the crisis relatively well and had been able to continue accessing new funds from international markets. That said, the global recession resulting from the financial crisis put strain on many governments’ budgets, including Greece, as spending increased and tax revenues weakened.
Reliance on financing from international capital markets left Greece highly vulnerable to shifts in investor confidence. Investors became jittery in October 2009, when the newly-elected Greek government revised the estimate of the government budget deficit to nearly double the original number. Over the next months, the government announced several austerity packages and had successful rounds of bond