Crisis which never got solved

Eurozone Crisis

“When the euro was born, it was born in the wrong economic circumstances”

Why crisis occur? Why it always happen that, when all people, economy, states and nations, come together for their mutual benefit some or the other things goes wrong? Let us try to find out why I started with a negative quote. On 1^st January 1999, the most strong currency “euro” came into existence. After World War II, in the late 1990’s European Economic Community was formed to make “euro” as a currency more strong. European Economic Community was later called as European Union. The main aim of creating such union was that, Europe’s political leader wants to achieve prosperity and secure them by creating a good relationship among various states. “Cooperation rather than confrontation” was the motto of leaders in Europe. Eurozone consist of 17 European Countries; Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain. Some countries were disqualified from being a part of Eurozone because of their economy being weak or due to some political and domestic reasons. In 2007-2009, US crisis lead to global financial crisis which further spread to Euro zone and caused Euro Zone Crisis. In October 2009, Greece was the first member of Eurozone to get affected by crisis severely and later other members like Portugal, Italy, Ireland, Greece, and Spain (PIIGS) lead to sovereign debt crisis. Greece economy was affected badly as debts were high and rate of interest was rising at an alarming rate, which lead to crisis. Greece had a national debt of Euro 300 billion ($413.6 billion), GDP ($360 billion), Debt-GDP ratio (113% of GDP), Budget Deficit (12.9% of GDP), Current Account Deficit (11.0% of GDP), Net Foreign Debt (70% of GDP), Total Outstanding Public Debt(290 billion euro). Due to Greek Crisis, other countries were also affected like Serbia, Albania, Macedonia, Romania, Bulgaria, Turkey and south-eastern Europe. Impact of Greek crisis in these countries were not only on private individuals but also made investors nervous about lending money to government(government bonds) as they knew the economy was down falling and they might not get their amount if they invest in these bonds. After Greece, Spain was the second member to get effected by this crisis as, country’s unemployment rate raised up to 20%.Even, Italy faced deficit of 4.6%.India was affected by crisis as, India used to export textile and software to Europe which witnessed slump close to 10%.Slowly slowly this problem started affecting many country and a crater was formed. To fill this crater, so that other countries don’t fall into it, emergency parachute came into existence. Emergency parachute was a measure taken by various sections of society, so that Eurozone Crisis can be solved. Basically 5 major measures were taken to solve the crisis. In 2010, the first measure was implemented, called as “Bailout package”, where Euro 110 billion was given to Greece by Eurozone countries to fill their crater. But this measure was not enough to fill the crater created by crisis. So, Parachute of two times of Euro 110 billion (Bailout package) was provided by Eurozone countries to fill the crater of Greece and also for other countries who were showing the signs of financial weakness. The next measure taken by Eurozone was “European Stabilization Mechanism” i.e., all the member of euro zone contributed 420 billion euro with a condition to payback as and when the economy is stabilized. But, this measure also failed. The next measure was taken by European Central Bank towards Greece as private banks were not ready to lend money to Greek because of risk associated to it as they might not get their money back and this was against the rule of European Central Bank. So funds were provided by Central Bank to Greece but this was also not enough to fill the crater. The final measure was taken by the Greek Government by increasing the taxes and introducing privatization. Even after taking so many major measures, crater was not filled and still Greek continues to live with crisis. The future of this crisis is that it might bring Europe to its knees or it will affect the entire global market more drastically. After reading the whole situation on Greek crisis/Euro zone crisis we can understand why we started with a negative quote.