Wednesday, October 9, 2019

Why is the European Crisis So Much More Severe than the US Crisis and Essay

Why is the European Crisis So Much More Severe than the US Crisis and What Could Be Done to Fix It - Essay Example This crisis first manifested in late 2009 when the sovereign debt crisis was triggered by the increased levels of government debt around the world, and it was worsened by the downgrading of government debts for some European countries. Various causes of economic crises were seen for different European countries and all of these issues converged to form sovereign debts which were further increased by banking bailouts. In some other countries in Europe, their crisis was caused by private debts arising from the downturn of the property market. Greece was one of the countries which were significantly affected by this crisis. However, in general, the impact of the European crisis has been largely extensive. The impact of this crisis however seems to be larger and longer as compared to the US economic crisis as the US is now manifesting improvements in their economy. This paper shall discuss why the European crisis is so much more severe than the US crisis and what could be done to fix it. ... In effect, any economic decision and government solution imposed by the US federal government is a decision which is meant to affect the entire country, not just a particular state (Koba, 2012). For the European community however, the crisis stems from a variety of causes for different countries and any solution to be implemented by the European community would be difficult to implement to all countries (Nelson, et.al., 2012). The European crisis is taking much longer than the US crisis to resolve because it is caused by various issues. These causes seem to include the following or a combination of the following: globalized finance, flexible credit option from 2002 to 2008 which caused high-risk spending, 2007-2012 global financial crisis, global trade imbalance, real estate crisis, 2008-2012 international recession, and bailouts of banks and private bondholders (Kakutani, 2011). All of these elements combined form the European economic crisis. In the last two years, the European Zon e has carried out various considerations on how to handle their crisis. However, Greece, Ireland, Portugal, Spain, and even Italy have experienced a significant rating downgrade of their sovereign debt (Kakutani, 2011). This led to issues of default and a significant rise in borrowing costs. And, while this zone may be prompted to do whatever it would take to resolve the crisis, it would be unlikely for the situation to be resolved in the immediate foreseeable future. This crisis is not a classic currency issue (Sri Kumar, 2012). It is an issue which involves the management of economies in a currency zone, with their related economic and political issues arising from the fact that their citizens are doing

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