European Sovereign Debt Crisis (2009- ) 扩展阅读：欧债危机

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European Sovereign Debt Crisis (2009- )
                                                                                                                                  Updated: Sept. 15, 2011

Recent Developments

Sept. 15 Central banks moved to assuage fears that European banks could be threatened by a shortage of dollars, as they were at the height of the 2008 financial crisis, and opened new lines of credit to institutions in the first such show of force in more than a year. The European Central Bank, iacting jointly with the Federal Reserve of the United States, the Bank of England, the Bank of Japan and the Swiss National Bank, said it would allow banks to borrow dollars for up to three months, instead of just for one week as before.

It was the first coordinated effort to provide dollars since May 2010, and seemed to go beyond just providing reassurance that European banks would not be cut off by American lenders wary of their financial state. The central banks seemed determined to demonstrate that they would not hesitate to deploy their combined weight to keep the European sovereign debt crisis from becoming a bigger threat to the global economy.

Overview

Since the fall of 2009, the European Union has been struggling with a slow-moving but unshakable crisis over the enormous debts faced by its weakest economies, such as Greece and Portugal, or those most battered by the global recession, like Ireland.
A series of negotiations, bailouts and austerity packages have failed to stop the slide of investor confidence or to restore the growth needed to give struggling countries a way out of their debt traps. By August 2011 European leaders found themselves scrambling once again to intervene in the markets, this time to protect Italy and Spain, two countries seen as too big to bail out.
The crisis has produced the deepest tensions within the union in memory, as Germany in particular has resisted aid to countries it sees as profligate, and has raised questions about whether the euro can survive as a multinational currency. It has posed great risks to many of the continent's banks, which invested heavily in government bonds, and forced deep and painful cuts in government spending that drove up unemployment and put several countries back into recession, leading a growing number of economists to call the austerity policies self-defeating.

The economic crisis gradually became a political one as well, leading to the ouster of governments in Ireland and Portugal, dragging the government of Greece to the brink and weakening the ruling party in Spain. Protests by traditional interest groups like public sector unions were joined by crowds of young people who camped out in Madrid and Athens in imitation of the Arab Spring demonstrations.

In the spring of 2010, after much hesitation, the European Union and the International Monetary Fund combined first to offer Greece a bailout package of 110 billion euros ($163 billion), followed by a broader contingency fund of  500 billions euro (about $680 billion). The hope was that this show of financial force would reassure markets about the solvency of euro countries.
But the new loans, combined with the effect of the austerity measures demanded of Greece, Ireland and Portugal, drove them into recession and did little to ease their debt burden — Greece's debt load even increased. As the debt crisis renewed over the winter of 2010 and spring of 2011 it led to the fall of governments in Ireland and Portugal, and saw unrest rise in Spain, where unemployment remained close to 20 percent.

By the summer of 2011, it was clear that Greece would need a second big bailout package, and worries rose again about contagion, as Italy and Spain saw the interest rates charged on its borrowing rise steeply. The European Central Bank responded by buying large amounts of Italian and Spanish bonds, as leaders put together a plan that would increase the powers of the European Financial Stability Facility to head off a "run'' on governments seen as in danger of default.

By September, with growth slowing, stalled or in reverse across the continent, European leaders were increasingly discussing the creation of a central financial authority — with powers in areas like taxation, bond issuance and budget approval — that could eventually turn the euro zone into something resembling a United States of Europe.

But talk of long-term solutions did little to calm markets worried about the weakness of banks in France and elsewhere that held large amounts of debt from Greece and other shaky governments. And the resignation of Jürgen Stark, a top German official at the European Central Bank, highlighted the depth of policy discord among senior policymakers. Mr. Stark, like many German officials, had opposed the bank's large-scale purchases of government debt.

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关键词：Sovereign European Europe Crisis 欧债危机 欧债危机 dollars credit opened

Earlier that summer, Greece, which had started the crisis, faced its more dire fiscal emergency, as it stood to run out of cash in August without a new installment of money from the first bailout. European leaders refused to release the funds until a second, more drastic round of austerity measures were adopted, including the sale of $72 billion in state assets. The government of Prime Minister George Papandreou teetered, but the measure was pushed through after days of giant street protests.

The basic conflict over the shape of a new bailout plan was between Germany's chancellor, Angela Merkel, who insisted that private banks pay part of the cost by taking losses on Greek bonds, and the European Central Bank, who opposed even a voluntary "haircut'' for banks, saying it would be seen as a default.

The deal reached in late July included $157 billion in new funds for Greece and a modest reduction of its debt burden; private lenders saw their bonds rolled over into longer maturities but also had them guaranteed. And the European Financial Stability Facility, the eurozone rescue fund, saw its contingency fund grow to 440 billion euros, or $632 billion, and was given new, amplified powers and the ability to use the money to bail out Portugal and Ireland if necessary.

The response to the package was not what leaders hoped: investors began driving up interest rates in Italy and Spain, economies too large to be bailed out by the new arrangements. At the same time, the fall in confidence threatened to undermine the big banks in those countries, whose large holdings of government bonds began to lose value.

On Aug. 7, 2011, the European Central Bank said it would “actively implement” its bond-buying program to address “dysfunctional market segments,” a statement interpreted as a sign that it will intervene to prevent borrowing costs for Italy and Spain from becoming unsustainable.

Vowing Closer Paths

To address the growing debt crisis, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France met on Aug. 16, 2011 at the Élysée Palace in Paris. The leaders promised to take concrete steps toward a closer political and economic union of the 17 countries that use the euro. They called for each nation in the euro zone to enshrine a “golden rule” into their national constitutions to work toward balanced budgets and debt reduction, a level of discipline well beyond the current, oft-broken commitment. They also pledged to push for a new tax on financial transactions, and for regular summit meetings of the zone’s members.

Both leaders ruled out issuing collective bonds, known as eurobonds, to share responsibility for government debt across member states, and they opposed a further increase in a bailout fund that will not be put into place until late September 2011 at the earliest. Mrs. Merkel said there was “no magic wand” to solve all the problems of the euro, arguing that they must be met over time with improved fiscal discipline, competitiveness and economic growth among weaker states.

But a growing number of leaders are quietly discussing a broader plan for greater fiscal integration — since the alternatives could include the collapse of the euro or increasing conflict over bailouts.

Officials said a major overhaul of the way Europe conducts fiscal policy was likely to take a long time and require changes in the treaties governing the euro. But they pointed to the smaller changes that were already taking place as evidence that euro area financial ministries see that they have little choice but to move together if they want to avoid a catastrophic breakdown.

The talks took place against a background of increasing continent-wide distress. Official figures released in August 2011 showed that quarterly growth in the euro zone fell to its lowest rate in two years. Germany — the Continent’s powerhouse — slowed almost to a standstill. Most of Europe’s main stock indexes lost ground after the data suggested that the debt and economic problems in countries like Greece and Italy were infecting the rest of the 17-country euro zone.

Background

The debt crisis first surfaced in Greece in October 2009, when the newly elected Socialist government of Prime Minister George A. Papandreou announced that his predecessor had disguised the size of the country's ballooning deficit.

But its roots of the crisis go back further, beginning with a strong euro and the rock-bottom interest rates that prevailed for much of the previous decade. Greece took advantage of this easy money to drive up borrowing by the country's consumers and its government, which built up $400 billion in debt.

In Spain and Ireland, government spending was kept under control, but easy money helped turn real-estate booms there into bubbles -- a process helped in Ireland's case by the aggressive deregulation of its banks that helped draw investment from around the world. After the bubble burst, the Irish government made the banks’ problems its own by guaranteeing all their liabilities.

After the extent of Greek debt was revealed, markets reacted by sending interest rates up not only for its debt, but also for borrowing by Spain, Portugal and Ireland.

In early 2010, the European Union and the International Monetary Fund put together a series of bailout packages for Greece that totalled 110 billion euros ($163 billion) in a process that critics said ended up costing more because European leaders failed to get ahead of the curve. In May, leaders approved a contingency fund of  500 billions euro (about $680 billion) for the union at large.

The hope was that the fund would never have to be tapped, as its existence would calm investors. But in the fall of 2010 interest rates began creeping up again, as countries that reduced spending to meet tough deficit targets found themselves falling farther behind, as their economies slowed and revenues declined. In November, European officials arranged a bailout of 85 billion euros (roughly $112 billion) for Ireland, after overcoming the resistance of Irish officials to the move, which they saw an attack on sovereignty. (In fact, news of the deal led Prime Minister Brian Cowen to announce that he would step down after passing a new round of budget cuts, and his party was ousted at the next election).

In January 2011, after a holiday lull, investors began driving interest rates up for Portugal, Spain and Italy. And with Greece and Ireland now paying out 80 percent of their export revenue toward external debt, pressure was mounting in both countries for a restructuring of the debt — something that would further undermine Europe's still vulnerable banks, which hold billions in government debt.

In May, a bailout package of 78 billion euros ($116 billion) was announced for Portugal, although it had yet to win the backing of the opposition parties that had brought down the government by blocking a new round of austerity measures.

Later that month, European officials prepared another bailout package, which would offer billions of euros in new loans in return for accelerated privatization and tougher tax collection measures. The agreement for as much as 60 billion euros ($86 billion) would in theory address Greece’s need for cash this year and next, and puts off for the time being a restructuring, hard or soft, of Greece’s huge debt burden.

In Germany, where public sentiment is solidly against bailouts, officials initially insisted that aid would have to punish private bondholders, a condition that was blocked by the European Central Bank, which has been a buyer of last resort for Greek bonds, and by France, whose banks are most exposed to Greek debt.

Officials were instead exploring a voluntary restructuring modeled on the Vienna Initiative, after a 2009 agreement under which international lenders agreed to roll over credit lines and maintain their exposure to Central and East European countries to carry them through the global financial crisis.

Longer-Term Changes

Throughout the spring of 2011, the continent's leaders were groping toward a longer-term solution. In February, Angela Merkel, Germany's chancellor, who had become known across Europe as "Frau Nein,'' or Madame No, made a remarkable about face, declaring her support not only for propping up the euro but creating a more closely integrated economic system.

In essence, if the euro was to be saved and a solution found for the debt issues straining the unity of the 17-nation euro zone, Germany must be the lender of last resort. And for that, the Germans have a price: raising retirement ages, scrapping any links between wages and inflation and bringing corporate tax systems closer together. In other words, making the rest of Europe more like Germany.

The idea faced significant resistance from other countries, rich and poor. More broadly, a growing number of economists argued that the move could lessen the immediate crisis but would not deal with the flaw in the euro it had revealed: that putting weak economies like Greece's and strong economies like Germany's under a single umbrella meant that the weaker ones were unable to regain competitiveness by devaluing their currency, locking them in to what appears bound to be a long, slow and arduous path to recovery.

bond issuance  债券发行
the first bailout 第一轮救助计划
prop up 支持
   D.C.North had said that"the efficient Property Right Structure that is the foundation of keeping economic vitality,and the PRS is decided by their state,so the country should be responsible for the recession and congnation" Of course, there are a series of negotiations ,bailouts and austerity measures for solving the Europe debt crisis! Thus far , little progress has been made! The governer are restorted to  their national constitutions to work toward balanced budgets and debt reduction,especially on the fiscal plans!

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