The Economic Crisis Of The European Union - 1013 Words

Due to the economic recession which started in 2008, several members of the European Union became historically known as PIIGS. These states include Portugal, Italy, Ireland, Greece and Spain. The reason why these countries were grouped together is the substantial instability of their economies, which was an evident problem in 2009. The reason why the five countries gained popularity is a serious concern within the EU, with regard to their national debts, especially for Greece. The latter country was involved in a controversial affair after allegedly falsifying its public financial data. In the year 2010, it was evident that the five states were in need of corrective action in order to regain their former financial stability. Looking back†¦show more content†¦Banks in stronger European countries, such as France and Germany, own lots of bonds from struggling European PIIGS countries, (PIIGS, 2016). That s not all: In Spain and Ireland, many banks have bad loans on their books as a result of their collapsing real estate markets. Illustration of the money borrow by the PIIGS: http://demonocracy.info/infographics/eu/debt_piigs/debt_piigs.html A deficit is the difference between the money Government takes in, called receipts, and what the Government spends, called outlays, each year. Receipts include the money the Government takes in from income, excise and social insurance taxes as well as fees and other income. Outlays include all Federal spending including social security and Medicare benefits along with all other spending ranging from medical research to interest payments on the debt. When there is a deficit, Treasury must borrow the money needed for the government to pay its bills. One way to think about the debt is as accumulated deficits. In economies with highly inverted balance sheets, shocks can be so self-reinforcing that periods of rapid growth become growth â€Å"miracles† but, as happened in nearly every growth miracle case in history, the subsequent periods of decelerating growth can swiftly degenerate into collapse or lost decades of unexpectedly low growth. In Europe’s case, the intensively reflexive relationship between sovereign creditworthiness and the domestic banking system may be