EUROPEAN SVEREIGN DEBT CRSIS.doc

Introduction The European sovereign debt crisis is in the form of a sovereign debt crisis that originated in the national credit that there is problem of the governments balance sheet. European sovereign debt crisis has several reasons, but the most fundamental reason is the countries lost production. In the Greek sovereign debt crisis seriously affect the residents consumption, lead to the economy and exports decrease, besides because of the not flexible monetary policy, the government had to depend on increase investment and consumption economy, thus the national debt and deficit increase. Eventually as the vicious cycle in which deficit and exports decrease make the Greek’ credit and sovereign risk increase and fully expose these issues during European sovereign debt crisis. For the European Union is faced two problems that between technologies hardly increase and currency value keep firm. (Arghyrou M GKontonikas A, 2012) Main body 1.Start from Iceland European?sovereign?debt?crisis originated in Iceland, which is the first country of sovereign debt crisis, the reason is that the financial crisis has damage its financial sector，thus the insolvency of the three big state-owned Banks are forced to take over by the government, inducing worries about sovereign debt problems by financial market. More over，this worry??continued?until?2009， and the heat of the sovereign debt crisis reached a peak with Fitch cut Greeces credit rating from A - to BBB +.Meanwhile，other so called pigs(Greece, Portugal, Italy, Spain and Ireland）all doomed?(Gartner, Jung and Griesbach, n.d.) .In fact，European?sovereign?debt?crisis have been considered as the aftershocks of the sub-prime mortgage crisis in 2008 as well as the product of a currency crisis.Specially,currency crash happened in a country under the condition of currency depreciation in a short term.As the value of currency collapse,it will induce a wide range of economic crisis as well as the long-term effects for financial