Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. The European sovereign debt crisis was a period when several European countries experienced the collapse of financial institutions, high government debt, and rapidly rising bond yield spreads in government securities.
The debt crisis began in with the collapse of Iceland's banking system, then spread primarily to Portugal, Italy, Ireland, Greece, and Spain in , leading to the popularization of a somewhat offensive moniker PIIGS.
It has led to a loss of confidence in European businesses and economies. The crisis was eventually controlled by the financial guarantees of European countries, who feared the collapse of the euro and financial contagion, and by the International Monetary Fund IMF.
Rating agencies downgraded several Eurozone countries' debts. Greece's debt was, at one point, moved to junk status. Countries receiving bailout funds were required to meet austerity measures designed to slow down the growth of public-sector debt as part of the loan agreements. Some of the contributing causes included the financial crisis of to , the Great Recession of to , the real estate market crisis, and property bubbles in several countries.
By the end of , the peripheral Eurozone member states of Greece, Spain, Ireland, Portugal, and Cyprus were unable to repay or refinance their government debt or bail out their beleaguered banks without the assistance of third-party financial institutions. Also in , Greece revealed that its previous government had grossly underreported its budget deficit, signifying a violation of EU policy and spurring fears of a euro collapse via political and financial contagion. Seventeen Eurozone countries voted to create the EFSF in , specifically to address and assist with the crisis.
The European sovereign debt crisis peaked between and With increasing fear of excessive sovereign debt , lenders demanded higher interest rates from Eurozone states in , with high debt and deficit levels making it harder for these countries to finance their budget deficits when they were faced with overall low economic growth. Some affected countries raised taxes and slashed expenditures to combat the crisis, which contributed to social upset within their borders and a crisis of confidence in leadership, particularly in Greece.
Several of these countries, including Greece, Portugal, and Ireland had their sovereign debt downgraded to junk status by international credit rating agencies during this crisis, worsening investor fears. A report for the United States Congress stated the following:. There has been an attempt at reducing the need for bank bailouts with new rules that require creditors to take losses, although in practice that proved politically unpalatable in Italy where the creditors of banks under pressure included many small savers.
There has been less progress with the third element seen as necessary for banking union, known as deposit insurance. It's a system that ensures that people don't lose the money they hold in a bank account - usually up to a certain limit - if the bank fails. Individual countries in the eurozone have such arrangements but the worry is they can be overwhelmed if a crisis is widespread enough. Some sort of eurozone-wide scheme could address that. The European Commission made a proposal in but it has not been agreed.
Then there is the case made that the eurozone needs more integration of the government finances - or fiscal policy - to cope with economic shocks that affect specific countries, such as Spain or Ireland's property market and banking crash. A report by top EU officials said: "For this reason, it would be important to create in the longer term a euro area-wide fiscal stabilisation function.
It's worth adding that they did not envisage a compete centralisation of government finances: "Euro area Member States would continue to decide on taxation and the allocation of budgetary expenditures according to national preferences and political choices. So the conclusion is that the eurozone has done some work on reducing its vulnerability to a repeat of the recent traumas. But it is work that is not complete. Greece bailout protesters storm ministry. Greek PM survives vote over Macedonia deal.
Image source, Getty Images. Prime Minister Alexis Tsipras says Greece is "turning a page" in ending its bailout programme. Many objected to spending cuts brought in to reduce Greek government borrowing. Prime Minister Pedro Sanchez is in contact with his counterparts in other EU countries to push this through, another senior official said, with several of the sources stressing this fund was the priority for Spain.
Even if Italy were to change tack and tap the ESM line, that would not change things for Spain, several of the sources said, adding that Madrid was keen to differentiate itself from Rome.
Besides, the ESM could only give Spain a maximum of 24 billion euros and would be far from covering all its needs, they said. Spain has however said it would use the so-called SURE line, another European tool approved to face the coronavirus crisis and dedicated to paying unemployment expenses. Financial institutions such as Countrywide, Lehman Brothers, and Bear Stearns failed, and the government responded with a massive assistance package.
On Oct. This figure represented the biggest bailout in financial history to that date. Automakers such as Chrysler and General Motors GM were also knocked down during the financial crisis. The automakers sought a taxpayer bailout as well, arguing that, without one, they would not be able to stay solvent. Automakers were under pressure as slumping sales plunged amid the dual impacts of surging gas prices and an inability for many consumers to get auto loans.
More specifically, the high prices at the pump caused sales of the manufacturers' SUVs and larger vehicles to plummet. Simultaneously, the public found it difficult to get financing, including auto loans, during the financial crisis as banks tightened their lending requirements, further hampering auto sales. As of April , the U. National Bureau of Economic Research. Accessed Sept. Irish Office of the Comptroller and Auditor General. Council on Foreign Relations. Congressional Budget Office.
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