Euro Crisis

Fiscal crisis, contagion, breakdown of the euro...

Let,s try to understand what had happened.what actually had caused this crisis whoose impact 

is still prevailing and will continue to prevail in coming time.Five reasons that had given birth to such drastic issue were:-

1)Fiscal revenues in excess of expenditures :-In this case, investors require higher interest rates to subscribe new public debt as a compensation for the risk of insolvency. This in turn increases the risk of insolvency as it worsens public sector balance sheets. At some point, there may no longer be an interest rate able to compensate investors for the risk of insolvency; then they just stop subscribing the public debt.

2)in the case of Greece, monetization - was ruled out by Greece’s membership in the European monetary union: the Greek government could not force the ECB to buy its own bonds. For this reason, the only option was insolvency and renegotiation of the debt, unless other countries were willing to lend to Greece at an interest rate lower than the market rate.

3)Fear of Contagion

4)The fourth element that has played a role in the crisis is “roll-over risk”. Countries involved are exposed to a fiscal crisis to the extent that they are forced to rely on the market to roll-over their debt. Thus, much depends on the amount of public debt coming to maturity in the next months.which had not turned out in favor.

5)Euro had depreciated .