The European Dept Crisis. Why it occured and what we can learn of it (PDF)

Bachelor Thesis from the year 2019 in the subject Business economics - Investment and Finance, grade: 7.5, Maastricht University, course: Finance, language: English, abstract: This thesis can be divided thematically into three major areas, to ultimately answer the questions of how the European debt crisis came to be, what weaknesses within the EMU led to this, and what lessons can be drawn from it all. First, the developments of the EMU from its inception up to the financial crisis in 2007. Second, the financial crisis and its direct impact on the European sovereign debt crisis. Third, the thesis gives an outlook on the current situation eight years after the outbreak of the crisis and provides suggestions for future research.
The Euro celebrated its 20th anniversary last year (2019) and is known worldwide as a symbol of the unity and sovereignty of the European Union. Introduced at a time by people and states who had fought a relentless war against each other in the same century, the Euro is one of the greatest achievements of modern times. Today, a European generation is growing up that no longer knows any national currency and does not understand why it is so important to protect the Euro as a common currency. However, it is precisely this generation that has to deal with the national debt crisis, which has become one of the greatest economic policy challenges that the united Europe has faced since the existence of the monetary union.
The purpose of this thesis is to help understand the development of the European sovereign debt crisis from the introduction of the Euro to the present day. In this context, special attention is paid to the analysis of the causes, since these must be understood fundamentally in order to avoid the repetition of the same process in the future. The key motivation behind this paper is that with current declines in economic growth and inverse yield curves pointing towards a recession, it is more important than ever to understand past developments to avoid such collapses in the future. Past empirical research often overlooks this important forward-looking function; further, most works were published immediately after the financial crisis, with relatively few recent contributions. Clearly, the relevance for society as a whole is given, as implications of economic crises as extremely widespread and caused devastation for many. As globalization has only increased in the decade thereafter, any coming recession would be worse than those experienced before.