By: Rolf

When the recent depression hit, everyone was in shock. The housing market went into a free-fall and bonds and stocks alike all crashed. Investors who were worth $5 million, were suddenly homeless and trillions of dollars became worthless. Now, the Eurozone economy is still in ruins and the road to recovery is still littered with heavy obstacles. The unemployment percent is still one of the highest in developed countries at 11.5% and banks have one of the worst ratings in the world. Now, how did this all happen and when did all of these negative trends start? Let’s go back to the beginning. In 2008, the world depression hit and the Eurozone, like all other countries were ill-prepared to deal with the crisis. Banks had given away so much money and international defaults were common. The housing bubble burst and land suddenly became worthless. Government debts reached alarming records and the unionized currency did not allow for major tax breaks or increases and public services created as much as 10% of the total debt. Fearing commercialized widespread financial crashes, governments decided to bailout the banking system and to some extent, slowed the ever growing debt. But the banking system had still not recovered as it had loaned out all of its money at low interest, risky loans. Panic forced many companies to shut down or stall and the unemployment rate reached 27% in some countries. Countries such as Greece faced pressure to change government action and it was uncovered that many countries had been underestimating public debt by 7%. For example, Greece had reported a 6% debt in 2008 while it had been 13%. In fact, the instability caused the credit rating to crash and investors could have been losing 30% of their money. In the years during the crash, over 1 trillion Euro’s were handed out as “bailouts” and many countries stopped loaning to the Eurozone. During 2009-10, Italy and Greece among many countries wanted to quit the Eurozone, but they were talked down by the USA as the effect on the Eurozone would be devastating. All loans would double and over 20% of the GDP of Greece, Cyprus, Italy… would be wiped out and the government debt would rise to 200% of the GDP. When things stabilized, investors were still too scared to return to the Eurozone. But things started to look brighter. In a long term stability plan, the major governments decided on a plan to reduce debt dramatically and to preserve the Eurozone. Now many euro countries had their debt drop from 130% of the GDP to under 115%. Is this the way forward? I hope so or the world will start to fall apart once again and in the end, if there is another crash, only China and the oil producing states (Iran, Saudi Arabia, U.A.E., Jordan) will be safe.

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