What is The Euro Crisis (European Debt Crisis)?

What is it?


Why and how did it come about?





I don't want to know about what should be done etc., just those answers to the above 2 (or 3) questions fairly briefly.





Thanks a lot, in advance!|||A catastrophe of their own making.





A dislocation in what Greece needs from a currency to trade efficiently, and what the value of the Euro actually is. If the Drachma was brought back in 1 Drachma would be worth perhaps 70cents or even 60 cents of a Euro (70% or even 60%)





It came about because the Euro is a fudge, the main problem is that for a single currency to work effectively, the Countries need to be tied Politically, they are not. Also it has arisen so quickly because Countries like Greece lied about their Economies and how much their deficits were.





The main problem however is that Greece came in at too strong a level when they joined, so the respective Euro was too high a level for their Country, which made Greece expensive for Foreigners to visit, so trade went down, they still had to pay the wages of Government employees, these were too high as well, and too many Government workers for the Tax receipts. They also have a very inefficient Tax system which many rich people ignore.|||When the EU member countries that decided to join their currencies to form the Euro out of Francs, Marks, Lire etc there was a lot of fudging of figures. No account was taken of the different growth rates or public borrowings of each. Equally harmfully no account was takenof their vastly different tax and spending regimes. When the first countries to break such rules as there are turned out to be the big and "responsible" countries of France and Germany with their strong economies the weaker and more spendthrift ones took this as carte blanche and basically did the same. What we have is a number of countries - Greece, Spain, Italy, Portugal and Ireland most obviously - where the amount they have borrowed to finance their public spending is now so big that there is some doubt that they can pay it off. The stronger economies - France and Germany mostly - have been bailing them out but there is little sign of serious reform and a declining tax take due to both fraud and unemployment is making it all the more difficult for the indebted countries. Meanwhile the lending countries are running into political problems as their populations are getting fed-up bailing out those they see as irresponsible lazy wasters. So now we have countries (Greece etc) who can't pay their debts and can't borrow any more except at very high interest rates and other countries (France and Germany etc) who will be in trouble if these debts don't get paid back. This all on top of the problems caused by the Global Financial Crash and the whole sub-prime/ credit default swaps story.


Interesting Times as the Chinese proverb has it.|||WHAT IS IT? Certain countries using the euro are running out of money and very fast


WHY AND HOW DID IT COME ABOUT? There are a few reasons that added up to the problem one is that by letting Greece join the euro it was breaking the rules of the euro anther reason it that with such a mix of different countries in the euro some rich ome not so rich it mean induvial countries could not control there own inflation and intrest rate to suit there own country|||1. PIIGS (Portugal, Ireland, Italy and Greece) governments have substantial debt

2. These debts are held as bonds in many banks, especially big French and German banks

3. If any of these countries defaulted (Unable to pay back)

4. Banks lost money holding these defaulted debts

5. Banks fears collapse and stop lending

6. Businesses cannot obtain loans to pay their workers because banks are too scared to lend

7. Businesses fails and workers became unemployed

8. Recession