What is euro crisis in simple words?

The eurozone crisis was caused by a balance-of-payments crisis, which is a sudden stop of foreign capital into countries that had substantial deficits and were dependent on foreign lending. The crisis was worsened by the inability of states to resort to devaluation (reductions in the value of the national currency).

What was the main reason of EU crisis?

The European sovereign debt crisis resulted from the structural problem of the eurozone and a combination of complex factors, including the globalisation of finance; easy credit conditions during the 2002–2008 period that encouraged high-risk lending and borrowing practices; the 2008 global financial crisis; …

What was the 2011 financial crisis?

The 2011 U.S. Debt Ceiling Crisis was one of a series of recurrent debates over increasing the total size of the U.S. national debt. The crisis was brought about by massive increases in federal spending following the Great Recession.

What are the major issues in the current European debt crisis?

Political Issues Involved in the Crisis In the affected nations, the push toward austerity—or cutting expenses to reduce the gap between revenues and outlays—led to public protests in Greece and Spain and in the removal of the party in power in both Italy and Portugal.

What happens in a currency crisis?

A currency crisis is brought on by a sharp decline in the value of a country’s currency. This decline in value, in turn, negatively affects an economy by creating instabilities in exchange rates, meaning one unit of a certain currency no longer buys as much as it used to in another currency.

What happened in the EU debt crisis?

The debt crisis began in 2008 with the collapse of Iceland’s banking system, then spread primarily to Portugal, Italy, Ireland, Greece, and Spain in 2009, leading to the popularization of a somewhat offensive moniker (PIIGS). 1 It has led to a loss of confidence in European businesses and economies.

How did the EU respond to the euro crisis?

Support largely consisted of access to very cheap loans. As the full scale of the crisis became clearer, Europe went a step further by recognising that loans would not be sufficient for the worst-afflicted countries, since they would only increase public debt levels further.

What happens when currency drops?

A fall in the exchange rate is known as a depreciation in the exchange rate (or devaluation in a fixed exchange rate system). It means the currency is worth less compared to other countries. For example, a depreciation of the dollar makes US exports more competitive but raises the cost of importing goods into the US.

What was the effect of the crisis on the currency markets?

Turnover in the money market fell during the crisis, however. It became concentrated at the very short end of the market and switched from uncollateralised to collateralised lending as growing credit and liquidity risks kept banks from granting long-term uncollateralised loans.