The European Financial Crisis by Robert Godby download in pdf, ePub, iPad
The only alternative is either a painful structural reform, as Greece has been forced to attempt as a condition of its bailout, or an exit from the common euro currency. Fears quickly spread that the fiscal positions and debt levels of a number of eurozone countries were unsustainable. The rising level of nonperforming loans among southern Europe's banks will trigger the next banking crisis. The government spent heavily to keep the economy functioning and the country's debt increased accordingly.
The bailouts exacerbated deficits that were already large due to decreased tax revenues and high spending levels. The crisis subsequently spread to Ireland and Portugal, while raising concerns about Italy, Spain, and the European banking system, and more fundamental imbalances within the eurozone.
Borrowers could be given the option of paying their euro debts with the new currency at some artificially set rate. The country's economic recession continued. That's the same as a partial write-off of that debt, and transfers the loss to the debt holders. The debate became more about politics rather than economics. This is neither politically, nor always legally, feasible.
However their French, German and Dutch colleagues refused to reduce the Greek debt or to make their private banks pay. In the case of Italy, this was a regular and predictable event.