European causes of its 2012 economic crisis Term Paper

European causes of its 2012 economic crisis - Term Paper Example ased the political risks for EU governments and their leaders.6 The economic disaster was weakening the bond between the EU nations and challenging EU’s unity and shared goals. Rapid exhaustion of liquidity left the periphery with unsustainable shortfalls and monetary obligations larger than their GDP. In 2010, a sovereign debt catastrophe, particularly in Greece, stretched throughout the periphery and jeopardized any economic opportunity for the EU.  In 2011, the European Union and the International Monetary Fund took actions to rescue Greece, Ireland, and Portugal.7 Governments of Iceland and Latvia have disintegrated resulting from the public complaints over their administrations for mishandling their economies throughout the tragedy. Sparking the protests even more was the International Monetary Fund’s issuance of emergency loans to the following EU nations: Belarus ($2.48 billion), Bosnia and Herzegovina ($1.52 billion), Hungary ($15.7 billion), Iceland ($2.1 bil lion), Latvia ($2.35 billion), Moldova ($118.2 million), Poland ($20.58 billion), Romania ($17.1 billion), Serbia ($4.0 billion), and Ukraine ($16.4 billion). In February 2009, the World Bank in alliance with the European Investment Bank and the European Bank for Reconstruction and Development announced a financial assistance grant amounting to $31 billion over two years to aid near-bankrupt banks and industries in Eastern and Central Europe.8 The economic turmoil caused a quick fluctuation in the Euro currencies of Eastern European countries and caused their government debits to climb, destabilizing the attempts of several countries to join the European Union. $1.5 trillion assets in EU banks were exposed in Central and Eastern Europe. In spite of the exposure of the major Western European banks for...This paper elucidates the real reasons behind The European debt crisis of 2012 and describes the effectual response of the EU to that negative economic situation. The five European co untries: Greece, Ireland, Italy, Portugal and Spain (GIIPS) that risked the future of the EU economy and caused various crises regarding the Euro are considered in the paper. Subsequent to the global downturn of 2007, the financial crisis in the peripheral states of the EU worsened: economic activity quickly dwindled; international trade plummeted; and prospects for Europe’s exportation industry diminished. Moreover, the rise of unemployment and distress over the economic chaos sparked protests and thus increased the political risks for EU governments. The response of the EU to the recession was fast and influential. Besides the intervention to steady, re-establish and restructure the banking sector, the European Economic Recovery Plan was commenced for re-establishing reliance and reinforcing demand by increasing the economy’s purchasing power through balanced tactical financial schemes and measures that would support the business and employment sectors. The entire economic incentive, as well as the outcomes of regulated fiscal stabilizers, totals 5 percent of European GDP. Greece, Ireland, and Portugal were given considerable financial supports by the IMF, the Eurozone and EU monetary institutions. Moreover, the generous contribution and dynamic mediation of the ECB to fiscal stability supported the European administration and banking system.