The European debt crisis.

Abstract

On January 1, 1999 the Euro was initiated. In the beginning this single currency was shared by 11 Euro area countries, pursued by 6 other countries from 2001 till 2011. This is how 17 countries with different currencies and different economies came together to form a homogeneous area which would facilitate the exchange. Over time, the Euro was subject to many fluctuations. From its original value of 1€=$1.18 to $0.8252 in October 26, 2000 to reach a historical high on July 15 of $1.599 after the official introduction of coins and banknotes on January 1, 2002. Back then, concerns about the collapse of the Eurozone never came into view. However, since 2010 such concerns emerged with the severe debt crisis that hit Portugal, Ireland, Italy, Greece and Spain. In this project, I start by introducing the subject in Chapter 1. Then in Chapter 2, I will discuss what went wrong in the system to cause the crisis and what the consequences were. In Chapter 3, I will talk about the measures taken to reduce the impact of the crisis and solve it. In Chapter 4, I will examine the debt sustainability of Germany and Greece. And finally in Chapter 5, I will give a general conclusion.