Magazine article Risk Management

EU Debt Crisis: Far from over or Nearing the End?

Magazine article Risk Management

EU Debt Crisis: Far from over or Nearing the End?

Article excerpt

In early 2010, fears of a sovereign debt crisis spread throughout European Union member countries. The fears diminished confidence and created a widening of bond yield spreads and risk insurance on credit default swaps. Though the Eurozone countries and the International Monetary Fund agreed to a 110 billion [euro] loan for the union's most troubled country, Greece, and the European Financial Stability Facility (EFSF) was created to provide financial assistance to Eurozone states in economic difficulty, the European sovereign debt crisis is far from over, which has people asking if a Eurozone break-up is in the future. Here, we take a look at the most troubled countries.


Soon after the European debt crisis hit Greece, it spread north to Ireland. The country's exposure to toxic bank loans is extremely worrying and its budget deficit, like that of its European Union neighbors, is many times higher than the 3% Eurozone limit. The 85 billion [euro] Irish rescue package that was finalized by the European Union and the International Monetary Fund has been called "a disaster" since while the country will be exposed to tax hikes and severe austerity cuts. the public debt will not be significantly reduced. Though Ireland's debt rating was downgraded last month by Standard & Poor's. Fine Gael, the party expected to lead the next Irish government, has sympathized with the public's outrage over the state of the economy and is promising changes.


It was just this past December that the IMF said Belgium "urgently needed" to control spending as public debt pushed above 100% of GDR Many questioned whether the political system could regain the spending discipline it practiced in the early 1990s when Belgium came back from the brink of bankruptcy with an impressive fiscal squeeze. And during January's World Economic Forum, Minister of Economy Vincent Van Quickenborne said that the country's debt "is predicted at 4.2% [of GDP] this year." Though the country raised funds with debt sales in January, there is no sign that its economic, or political, crisis is near its end, especially with an aging population and rising social expenditures.


Portugal, like many other Eurozone countries, is recovering slowly from the financial crisis of 2008. …

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