European Economic Crisis – Midweek Infographic

In 2008, financial institutions in the US began to drop like flies. Lehman Brothers – gone, Bear Stearns – gone, Washington Mutual – you guessed it, gone. Four years later, what condition are we now in? The US banking system has regained much of its strength as evident by the Federal Reserve’s stress tests. However, the problem that became apparent in 2008 has spread outside the borders of the US. Much of Europe, beginning with Greece, is feeling the wrath of our financial calamity.

Click on the video below to view today’s video infographic that explains how the US financial crisis has spread to Europe and its unified currency has turned the situation into an epidemic.

One thing this infographic does not go into is the effect of a unified currency on national sovereignty. Typically, when a country is in poor shape economically, they can manipulate their currency to combat the declining state they’re in by boosting exports. Of course, that’s not an option when you share the same currency as 16 other countries in the Eurozone.

One option for Greece is to drop out of the Eurozone and return to the drachma as the national currency. While it seems like this would be the best option, some experts disagree. They claim that one country’s departure from the Eurozone could cause a ripple effect, opening the door for others like Spain, Ireland, Italy and Portugal to withdraw.

Whatever happens, it needs to happen soon as the uncertainty abroad is affecting our markets everyday.

READERS: Why do you think the Euro continues to hold ground despite all of the fiscal problems in Europe? Do you think it was wise to unify the country under one currency or did Great Britain make the correct choice by rejecting the Euro in favor of the traditional Pound? What about Greece – will they and should they leave the Eurozone?

Comments

  1. I don’t think these countries are going to see the good days in near future because they are really empty from their insider economy and now the biggies are going to join them and make it one of worst global crisis ever.

    • Unfortunately, I agree with you. I don’t see things improving in the Eurozone for a while. Just look at the public debt-to-GDP ratio of Greece. How can a country expect to thrive with a ratio close to 170%? Experts don’t anticipate the number declining until 2014.

  2. I’m definitely not qualified to answer your question, but I know this: with soaring unemployment and (as you stated above) massive debt-to-GDP ratios, I’m not sure how they get out of this. As much as citizens are whining about some of David Cameron’s huge cuts in Great Britain, it seems like that might be the right answer in the end.

    • Greece will surely have to modify its entitlement programs. People are receiving pensions that are generations old. Sure, nobody wants to stop receiving something that they collected before, but that’s why things should never get to that point. People get used to government handouts and end up rioting when they start discussing the elimination of those handouts.

  3. This is really a loaded question because there really isn’t a perscription that all countries can follow to fix their problems. I don’t think that it is as simple as curing government debt problems. Many European nations have structural issues in their economies. For example, Spain has a low-education population. It’s going to take a long time for them to revitalize their economy’s fundamentals.

  4. What makes the European Economic Crisis are the people and they are also the key to fix the mess.

    • The problem with welfare states is that people get used to the handouts. It’s very difficult to take away something people have been given for so long.

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