20160226 【The European Financial Crisis】

The European Financial Crisis
Trouble is brewing for the European Union

The European Union was formed to promote peace and prosperity, but over the past decade,
it has faced a crisis that threatens those goals.


Origins of the crisis

Europe's financial crisis began not in Europe, but in the U.S.

When America's economy collapsed in 2008, many European banks lost money that they had invested in American assets.

Government of many European countries stepped in to bail out the banks.

This protected their economies but it was costly.

Ireland , for example, almost went bankrupt due to the expense.

Soon investors began to doubt whether some nations' governments could pay their debts.

But these nations still wanted to borrow more money to boost their nations' economies,
which drove up interest rates.

For Greece,Italy,Portugal,Spain and cyprus, borrowing money became prohibitively expensive.

The response

Realizing these nations faced serious financial trouble, the EU decided to act.

It loaned money at reasonable rates to the struggling nations.

It also took steps to regulate and oversee banking practices , hoping to stabilise the economy so it could recover.