european debt crisis

EUROPEAN DEBT CRISIS

Areg VardanyanMarina SedrakyanMariam PetrosyanOksana PetrosyanGevorg Beglaryan

UNITING EUROPE

• The Continent was at WarCountries at war didn’t trade together

• Doing business across borders was difficult Trade BarriersTariffsDifferent Currencies

REBUILDING EUROPE• Steel Tariffs came down• Unifying towards the goal of bringing down trade barriers• Fall of the Berlin Wall

• November 1, 1993 – Maastricht treaty• January 1, 1999 – The launch of Euro

Establishment of EU

• European Central Bank – Unified Monetary Policy

Deficit Spending and Borrowing

Before EU

• High interest rates• Limits for borrowing• No trust from money landers

After EU

• Access to credit never before Limits for borrowing• Same low rate as developed

countries• Money lenders believed that

developed countries would step in

• Huge deficit spending programs• Huge quantities of accumulated debt• Enormous housing bubbles• Economies of Europe became tightly intertwined

Results

2008 Global Crisis• US Housing market collapse• Greek economy dysfunction• Greek problem + Unified monetary policy = problem for

Europe

Austerity Measures• Cutting spending• Borrowing less• Paying more debt

VS

• Little state benefits

• Pay all taxes

• Generous state benefits

• Don’t pay majority of taxes

United Fiscal and Monetary Policies

• Set a fiscal policy within EU

• Cut spending• Raise taxes• Set laws

Political Organization

Without Fiscal Union• Countries will run deficits• Accumulate debt• Degrade the value of

Euro

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