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The United States experienced one of the most devastating economic crisis three years ago leading to difficult financial trends in markets around the world. It is believed that the U.S had enough mechanisms to deal with the situation which would have otherwise resulted into extreme and unbelievable world economic impact.
With the current crisis in Europe, the main challenge in handling the situation remains to be the uncertainty of what would happen if big banks were to be capitalized like it was done in the U.S. This essay analyzes the Greek market and economy which have been severely hit by the crisis.
The European Union has been hit by a wave of financial crisis that has threatened several countries, placing the future of European economy in danger. A lot has been said about the causes of this wave with countless proposals being considered in order to reverse and prevent similar cases in future. By the year 2001, the country had a debt load which had accumulated to over 100% prior to its decision to join the Euro (Dylan 1).
This move lowered interest rates on its debts because there was no worry about the possibility of devalued currency or inflation in future. Due to lower interest charge, there was increase in debt and an overall economic boom that led to the hiring of Wall Street experts to help the country not to go against EU rules.
The debt was downgraded in October 2009 which worsened the situation by February 2010. This forced the government to request for a rescue package from the IMF and EU, a move that sent the economic status of the country into a junky situation.
Several institutions moved in including the European Central Bank with an aim of bailing out the country from its economic turmoil. The IMF and EU agreed on a $145 billion to bailout Greece with conditions requiring the country to take austerity measures. The EU further created a body that was to oversee bailout of countries in future (Dylan 1).
The bailout failed, plunging the country into a more dangerous situation that has continued to affect it and the entire Europe. In June this year, Greece’s debt was reduced to CCC, a rating considered to be lowest for any economy in the world. This forced Papandreou to call for a confidence vote which passed allowing more austerity measures necessary for a second bailout of $145 billion (Dylan 1).
It was fully supported by France and Germany before being sealed by the EU in September 2011. Moreover, many downgraded Greece’s economy regardless of the efforts which had been invested in the bailout process. Together with other European countries Greece’s status contributes to the current Euro Crisis.
According to Lauricella of The Wall Street Journal, the market closed at $1.34 billion last week and it was headed to a low of $ 1.31billion. He however reiterates that the value is likely to rise to about $1.35 billion, after leaders realize the terrible state of European banks (Lauricella 1).
On the other hand, this is seen as an antecedent for a further fall because of existing forces in the market. As a result, several future forces are expected including the pressure on the debts in the region, banking tension and low growth in the Euro zone. The need for market recapitalization is therefore important despite the fact that it may take longer.
The Euro crisis is one of the most current economic events which have attracted immense global attention. It has affected almost every country in the region including Ireland, Portugal, Spain and Italy. The need to find a lasting solution is so crucial in ensuring that the effects of this crisis do not continue spilling to other regions as it is witnessed today.
Works Cited
Lauricella, Tom. Euro’s Next Stop Could be $1.25: Nomura. The Wall Street, 2011. Web.
Dylan, Matthews. Everything you need to know about the European debt crisis in one post. The Washington Post, 2011. Web.
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