Research On The Causes Of The Debt Crisis In Europe Based On Growth

Since the outbreak of the international financial crisis in2008, a series of majorevents occurred one after another in the area of the world economy. The Europeansovereign debt crisis is one of the greatest impacting and impressing accidences. Thecrisis which broke out from Greece in2009spread in Europe like a plague. Not onlyIreland, Portugal, Spain, Italy have been trapped closely follow after, but othermembers of the European Union, like France, Netherland, Belgium, also turn tofinancial crisis situation. The rumors of disintegration of the euro zone owing to debtcrisis prevail all over the world. For now, we may ask. Will the euro continue to exist?Will the world enter the second round of recession?Looking back at history, we can find that the debt crisis generally occurs in theprivate sector. There are less cases of the debt crisis of the public sector, compared tothe former. More deeply impressive one is the Latin American debt crisis of the1980s,as well as South Korea and Russia in the late1990s. As the protagonist of the debtcrisis, the countries of euro zone since the late09are all in the way to deterioration,and even Britain, the United States, Japan and other countries that is sitting in theperipheral euro zone is also quite disturbing by their fiscal situations. The sovereigndebt crisis which swept through countries following the financial crisis presents thetrend of becoming world economic crisis. Even the Davos Forum believes that thepublic debt problem is most likely to turn into the next round of global crisis.Therefore, to find the causes of the sovereign debt crisis in Europe, to grasp theinternal factors affecting the financial stability, have a major significance to resolveand prevent government’s debt crisis.The paper’s mainly object is to discover the producing mechanism of the debtcrisis by seeking the intrinsic factors that lead to fiscal imbalances on the focus ofGreece, Ireland, Portugal, Spain, Italy. In this course, on the reference of fiscal stablemodel and the theory of economic growth, I want to explain the reasons that lead thecountries into debt crises.The researching results show that the debt crisis is rooted in the overleveraged operation of the public or private sector. Whether the Government cover the deficit byissuing bonds, or industry use of commercial bank credit to expand production scale,will eventually lead to fiscal imbalances. And the purpose of them resort to leverage isto reconcile inconsistencies between economic supply and demand.