Research On The Cause Of European Sovereign Debt Crisis And Contagion Mechanism

In December2009, three international rating company the S&P, Fitch ratings and Moody’s downgraded the sovereignty of the Greek credit rating, people found that the Greek government was coming into a debt default situation, which triggering the social concerns about Greek sovereign debt crisis.2010, the contagion of Greek debt crisis effect began to reveal, crisis quickly spreads to other European countries, such as Portugal, Spain and others at the same time, including Germany and other major economies of the Euro area’s were also challenged. So far, gradually influencing the whole Europe sovereign debt crisis shocks the world economy which is still in the shadow of the subprime mortgage crisis into, also shaking the existential basis of Euro. The risk of sovereign debt crisis in financial market of the EU completes the conduction very fast, beyond the expectation of governments. Therefore, studying the cause of European sovereign debt crisis and contagion mechanism has an important practical significance to take precautions, remove the hidden danger and preventing crisis.This paper reviews the European crisis in different stages of the process, cause and the evolution of the crisis paths, and then from the environmental factors, Euro-zone system design factors, human promoting factors analyze European sovereign debt crisis and the cause. The sovereign debt crisis is the result of deepening of the global financial crisis. The main problem is system design that the EU internal economic system defects and policy don’t match. Secondly, the paper through analyzing the new data and documents studies the sovereign debt crisis contagion and summarizes the international contagion mechanism of four types that include international trade conduction, capital flow conduction and expected conduction. Paper uses quantitative index to analyze contagion mechanism and evaluates effectiveness of aid measures. Finally, the paper puts forward the countermeasures of the contagion mechanism and gives the investment suggestions to Chinese companies.