The European debt crisis and its implications : case of Italy and Spain

Abstract

One of the most important debates in the world today, is the debt issue, since many economies, mostly the Euro zone, affected by the global economic crisis, are experiencing high budget deficits and debt. The Euro area’s sovereign debt crisis is bringing forward some weaknesses in the euro zone’s construction. The Euro currency seems to be threatened and the EU must take the appropriate measures to prevent it from devaluation. This project tackles the issue of the European debt crisis and its consequences on the euro currency and on the international financial markets, in Italy and Spain. After a general introduction, Chapter II reviews related literature on debt and its exchange rate crisis. Chapter III describes the strengths and weaknesses of Spain, the problems it faces, and the consequences of the housing crisis on the banking sector. Chapter IV explores the reasons behind the evolution of the crisis in Italy, which was already in an unstable political and economic status. Chapter V develops an analysis of the measures that have been implemented in Italy and Spain to deal with the crisis and concludes with some policy implications. A view about what are the economic forecasts of the countries for the near future will also be presented.