Assignment 4: Credit Crunch

The Financial Crisis a.k.a the Credit Crunch. Something very bad that started out in the United States in 2007/2008 and affected the whole world economy in a very bad way. However, this year, early 2010, the European Union thought that the worse was over and that the Economy was recovering slowly. Now almost at the end of 2010, the European Union is in huge trouble. The credit crunch has caused serious issues to the European Union and its member states, which the EU thought would never happen when they introduced the Euro. The crisis itself did not had a direct impact on me. At the time it occurred, it was all over the news and our IBMS course even adopted the credit crunch in its courses. But besides that, I could not notice it that much.

The European Union that did notice it, received another big impact this year. One of the EU Member States, which is Greece , had created that so much budget deficit that it was near national bankruptcy. A company going into bankruptcy is mostly acceptable , but not when it is a whole Country. As a result the European Union had to bailout Greece by lending it additional money to recover itself. This was one solution , which was not based on EU law. When the European Union prepared and finally introduced the Euro, they made a special agreement which defined the maximum budget deficit a country could make. The so called stability pact was meant to prevent what had happened with Greece. The main reason that Greece even needed such a bailout is that the government was kind of lying about its budget deficit to the EU.

After the Greece bailout , another country got into serious trouble. Due to the credit crisis Ireland had pumped a massive amount of money into  the banks and nationalized the most of them to save the bank system of Ireland. This has gone horribly wrong and caused the whole country going into bankruptcy. I must be said that Ireland was ironically one of the richest EU members and now it is almost bankrupt and desperately needing EE help.

These two countries, with the help of the credit crunch, have brought the European Union in such a state where the Euro is near its end. Bailing out EU member states has caused huge pressure on the Euro that at this point, that even some of the European Union members are considering abolishment of the Euro or kicking out Member states. In the European Union view, this is a major problem mainly caused by the “financial crisis”.