Understanding The European Debt Crisis

In 1958, an organisation called European Coal and Steel fusion was formed. This evolved into the European Union (EU) which was established by the Maastricht Treaty in 1993. The European Union introduced the euro on January 1, 1999. On this day, 11 tinge countries of the EU started using euro as their currency. It deriveed countries such as Portugal, Italy, Ireland, Greece and Spain (to loafher standardised a shot known as the PIIGS), So how did it benefit them? Before these countries started to do the euro as a currency, they had to borrow silver at fol humiliateding rates much higher than the rates at which a farming like Germany borrowed. When these countries started to use the euro they could borrow cash at interest rates close to that of Germany, which was economically the better(p) managed country in the EU, As the famous American generator Michael Lewis says in a recent piece, The rest of Europe, in effect, apply Germanys conviction rating to indulge its mat erial desires. They borrowed as inexpensively as Germans could to buy stuff they couldnt afford Also early(a) than the utter interest rates, the inflation in the PIIGS countries was higher than the rate of interest. In au naturel(p) English, that means that if the borrowing rate is 3 per cent pick inflation is 4 per cent youre effectively borrowing for 1 per cent less than inflation.

Youre being paid to borrow. And borrow they did. And the European peripheral countries (PIIGS) racked up enormous amount of debt in euros. adjust the case of Greece, their debt currently amounts to some 160 per cent of their GDP, So, some other than the citizens, the disposals also started to bor row. This helped politicians keep their cons! tituency of voters happy, Take the case of Greece. A yack away over which now compensations 55,000 euros in Germany, pays 70,000 euros in Greece, even with the incident that Germany is a more productive nation. As Lewis writes, To get around pay restraints in the calendar year the Greek government obviously paid employees a 13th and even...If you want to get a full essay, order it on our website: OrderEssay.net

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