[444] Particularly Moody's decision to downgrade Portugal's foreign debt to the category Ba2 "junk" has infuriated officials from the EU and Portugal alike. [538] The main point of contention was that the collateral is aimed to be a cash deposit, a collateral the Greeks can only give by recycling part of the funds loaned by Finland for the bailout, which means Finland and the other eurozone countries guarantee the Finnish loans in the event of a Greek default. From the perspective of the financial crisis in 2008, the public debt ratio of some European countries involved in the European debt crisis at that time was around 150%. Some EU member states, including Greece and Italy, were able to circumvent these rules and mask their deficit and debt levels through the use of complex currency and credit derivatives structures. In late 2011, Landon Thomas in the New York Times noted that some, at least, European banks were maintaining high dividend payout rates and none were getting capital injections from their governments even while being required to improve capital ratios. [157] During September 2012, regulators indicated that Spanish banks required €59 billion (US$77 billion) in additional capital to offset losses from real estate investments. Seventeen Eurozone countries voted to create the EFSF in 2010, specifically to address and assist with the crisis. In 1999, 11 countries met and decided to create a new common European currency – the Euro. Weber, the former Deutsche Bundesbank president, was once thought to be a likely successor to Jean-Claude Trichet as bank president. In September 2011 the Swiss National Bank surprised currency traders by pledging that "it will no longer tolerate a euro-franc exchange rate below the minimum rate of 1.20 francs", effectively weakening the Swiss franc. Weber was replaced by his Bundesbank successor Jens Weidmann, while Belgium's Peter Praet took Stark's original position, heading the ECB's economics department. Labour concessions, a minimal reliance on public debt, and tax reform helped to further a pro-growth policy.[497]. [419], The Boston Consulting Group (BCG) adds that if the overall debt load continues to grow faster than the economy, then large-scale debt restructuring becomes inevitable. [287], Like the EFSF, the EFSM was replaced by the permanent rescue funding programme ESM, which was launched in September 2012. Unemployment rose from 4% in 2006 to 14% by 2010, while the national budget went from a surplus in 2007 to a deficit of 32% GDP in 2010, the highest in the history of the eurozone, despite austerity measures. As LSE researchers note, this had the effect that, Germany's creditors had an incentive to buy the country's goods, so that it would be able to afford to pay them. Michael Lewis-How the Financial Crisis Created a New Third World-October 2011, "Leaving the Euro: A Practical Guide" by Roger Bootle, winner of the 2012 Wolfson Economics Prize, Macroeconomic Policy Advice and the Article IV Consultations: A European Union Case Study, Over Their Heads: The IMF and the Prelude to the Euro-zone Crisis, Economic and Monetary Union of the European Union, Post-Napoleonic Irish grain price and land use shocks, 2011 Tōhoku earthquake and tsunami stock market crash, 2015–2016 Chinese stock market turbulence, List of stock market crashes and bear markets, European Coal and Steel Community (1951–2002), European Economic Community (1958–1993/2009), Mechanism for Cooperation and Verification, Cities with more than 100,000 inhabitants, Largest cities by population within city limits, https://en.wikipedia.org/w/index.php?title=European_debt_crisis&oldid=991454324, Articles with Portuguese-language sources (pt), Articles with dead external links from February 2017, Articles with dead external links from June 2016, Articles containing potentially dated statements from October 2012, All articles containing potentially dated statements, Articles containing potentially dated statements from 2015, Articles with unsourced statements from March 2018, Creative Commons Attribution-ShareAlike License, Banco BPI, Caixa Geral de Depositos, Millennium BCP, Banco de Valencia, Bankia, CatalunyaCaixa, Novagalicia. To prevent a vicious upward debt spiral from gaining momentum the authors urge policymakers to "act quickly and decisively" and aim for an overall debt level well below 180% for the private and government sector. To ensure that this is done as professionally as possible, the Germans would like to see the southern European countries receive their own state-owned development banks, modeled after Germany's [Marshall Plan-era-origin] KfW [Kreditanstalt für Wiederaufbau] banking group. State-owned utility and infrastructure companies like ANA – Aeroportos de Portugal, Energias de Portugal, Redes Energéticas Nacionais, and Brisa – Auto-estradas de Portugal were also downgraded despite claims to having solid financial profiles and significant foreign revenue. [302], With the aim of boosting the recovery in the eurozone economy by lowering interest rates for businesses, the ECB cut its bank rates in multiple steps in 2012–2013, reaching an historic low of 0.25% in November 2013. To minimise negative effects of such policies on purchasing power and economic activity the French government will partly offset the tax hikes by decreasing employees' social security contributions by €10 billion and by reducing the lower VAT for convenience goods (necessities) from 5.5% to 5%. [399] Increased European integration giving a central body increased control over the budgets of member states was proposed on 14 June 2012 by Jens Weidmann President of the Deutsche Bundesbank,[400] expanding on ideas first proposed by Jean-Claude Trichet, former president of the European Central Bank. The national exits are expected to be an expensive proposition. [6] A eurozone country can benefit from the program if -and for as long as- it is found to suffer from stressed bond yields at excessive levels; but only at the point of time where the country possesses/regains a complete market access -and only if the country still complies with all terms in the signed Memorandum of Understanding (MoU) agreement. Stability fund is not very stable. [408][409], Germany remains largely opposed at least in the short term to a collective takeover of the debt of states that have run excessive budget deficits and borrowed excessively over the past years. The European sovereign debt crisis! European countries had just weathered the 2008-2009 crisis and were set up hopes for recovery. It is strange that we have so many downgrades in the weeks of summits. [63], Some economic experts argue that the best option for Greece, and the rest of the EU, would be to engineer an "orderly default", allowing Athens to withdraw simultaneously from the eurozone and reintroduce its national currency the drachma at a debased rate. Purchasing power dropped even more to the level of 1986. [456] European leaders are reportedly studying the possibility of setting up a European ratings agency in order that the private US-based ratings agencies have less influence on developments in European financial markets in the future. In March 2011 a new reform of the Stability and Growth Pact was initiated, aiming at straightening the rules by adopting an automatic procedure for imposing of penalties in case of breaches of either the 3% deficit or the 60% debt rules. [288] The treaty will enter into force on 1 January 2013, if by that time 12 members of the euro area have ratified it. 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