European crisis 2012 pdf

The agreement, which has been held up for weeks amid disagreements over how much of a loss investors will voluntarily accept, is a key condition for Greece to receive more bailout money. Greece has struggled to meet the conditions of its bailout loans in the past and some euro area nations remain reluctant to provide more funds without assurances. Germany, the richest eurozone economy, has proposed giving EU authorities veto power over Greek budget policies as a condition of more bailout money.

Greece rejected the proposal as an infringement of national sovereignty, and other EU officials have ruled it out. That could lead to a disorderly default , a development that would have severe and unknowable consequences for the global financial system. The lack of clarity on the debt reduction and bailout talks have raised calls for Greece's creditors in the "official sector" to provide some relief. EU leaders on Monday called for a resolution to these issues "in the coming days" so that the private sector deal can be implemented by mid-February.

Meanwhile, investors have been growing worried that Portugal could be the next to face a default. EU leaders representing 25 members of the nation group have agreed to sign a pact designed to increase fiscal discipline and strengthen political ties.

The terms of the pact include, among other things, a legally-binding balanced budget requirement with an "automatic correction mechanism," and a provision to make fiscal policies of individual governments subject to EU authority "ex ante," or before the fact.

The 25 leaders hope to sign the pact at the next EU summit in March. But analysts say finalizing the new rules, which will require parliamentary approval in many cases, could take months if not years. The goal is to help prevent a future crisis by ensuring that governments do not spend beyond their means and rack up unsustainable debts.

The pact represents a step toward a so-called fiscal union, which economists say is necessary for the long-term stability of the euro currency. But critics say the agreement does not address the immediate challenges in the eurozone. To deal with the immediate challenges, EU leaders backed a plan this week to implement the European Stability Mechanism in July.

It will replace the temporary European Financial Stability Facility , which is effectively maxed out and set to be phased out next year. EU leaders expect finance ministers to make the plan official at the next Eurogroup meeting in February.

The aim is to restore confidence in global financial markets about the financing of troubled member states such as Italy and Spain. Borrowing costs for Italy and Spain have come down and both nations have enjoyed solid demand for short-term bonds this year. The unprecedented lending program is designed to prevent a deeper credit crunch in the banking system. Many European banks have struggled to secure funding from private sources amid concerns about their exposure to bad sovereign debt.

The latest phase of the debt crisis is playing out against a backdrop of declining economic activity across the eurozone. The IMF expects the nation region to suffer a mild recession this year as government cutbacks take a toll on growth.

The dour outlook sets up a difficult balancing act for officials as they struggle to revive growth and reduce debt at the same time. EU officials have proposed measures to boost employment, support spending on infrastructure projects and help small businesses grow. With a global sovereign debt crisis now an established reality, and the eurozone teetering while America has had its previous AAA credit rating downgraded by at least one major ratings agency, neither a continuation of failed policies nor gimmickry by politicians and central banks will bring an end to the global economic crisis in Instead of a return to economic growth, the most optimistic forecast one could make is stagnation which, at a time of structural mega-deficits and ballooning national debts, is a guarantee of further long-term economic misery for a great many of the planet's inhabitants.

Main Menu U. News U. Politics Joe Biden Congress Extremism. Special Projects Highline. HuffPost Personal Video Horoscopes. Follow Us. Part of HuffPost Business. All rights reserved. Suggest a correction. What's Hot.