European Debt Crisis: Economic Impact and Analysis Report

This report examines the European debt crisis, which began in late 2009 and significantly impacted countries like Greece and Spain, as well as the broader European Union. It delves into the causes of the crisis, including high lending and borrowing practices, fiscal policy challenges, and the debt burdens faced by European countries. The report specifically analyzes the roles of Germany and Greece, discussing their contributions to and benefits from the European Union. It also explores the impact on global businesses, particularly those from the United States, emphasizing currency risks and operational costs. The conclusion highlights the major consequences of the economic crisis for the European Union and global businesses, and suggests that countries like the United States should pay more attention to currency risks and costs of operations in foreign direct investments within the European countries.

Running Head: EUROPEAN DEBT CRISIS
EUROPEAN DEBT CRISIS
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Introduction
The Eurozone crisis took place in the European Union in the end of year 2009 at the
starting of year 2010. This crisis has a significant impact on the economic and labour market
of the countries like Greece and Spain and the entire European Union region. The role of
Germany and Greek in the European Union is discussed in this paper.
Discussions
The Eurozone crisis was raised due to high level of lending and borrowing practices
in the country. The use of fiscal policy and the various approaches used to bail out the debts
have troubled various bondholders and the banking sectors of the country. The countries of
Europe face debt burden and was unable to pay back the debt to the bondholders. The debt
money were collected from investors, bondholders and borrowers (Frieden & Walter 2017).
There were huge capital loss. Greeks was a country that has collected a huge sum of money
by collecting more tax. It also political affect in the country. Hence, the main cause of
economic crisis is liquidation in banking sectors, weak growth of the economy and more
liabilities. Greek economy was still a growing economy in the European zone. The country
had invested a huge sum in the heavy industries in order to sustain their economy. Hence,
more investment has increased the debt of the country. Germany as a country of Europe
Union has most important industrial sectors related to health, social activities, defense and
public administration. Germany provides money to the European budget that helps the Union
to fund various projects related to building of roads, money supported for researchers and
preventing the environment. Both the countries; Greece and Germany helps the European
Union to provide security and cooperation in the economic sectors of the continent. But, both
the countries are not equally benefited from the union (Stockhammer & Kohler 2019).
Because, it is important for Greece to stay within the Eurozone. If Greece moves away then

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the economic & political consequences will be more. A nearby of 20% of GDP of the country
will be affected and the debt ratio with inflation rate also increases. Therefore, it is important
for Greek to stay with European Union. Hence, Greek contributes less to the Europe Union
and benefited less. Germany is benefited more from the European Union because of its
stronger manufacturing base of export at a cheap rate.
Foreign Direct Investment by the companies is done to control their business
ownership and expands their business. As a global leader of the business it is recommended
that, the companies need to pay attention to the south-eastern region of Europe Greek,
because the countries are less developed and the purchasing power of the countries are low.
Investments of modern technologies in Europe cannot attract the investors (Buckley et al.,
2018). The investors face financial burden due to loss of return from the investments made by
the investors. Hence, the countries many not receive any benefits form the technologies
implemented in the union. The union is facing a high level of economic crisis, hence there
can be an unfair competitive advantages in the market due to unfair political pressures.
Currently, the continent is facing issues in unemployment, low economic growth and low
benefits from globalisation. This could impact the companies from other countries to sustain
their business in terms of globalisation and an objective of increasing the profitability (Arrese
& Vara-Miguel 2016). This is because, the current situation of Europe is continuously
changing both economically & politically and hence, will harm the business strategy.
United States having a debt of $18 trillion should pay attention to Euro crisis. They
should focus more on balancing their federal debt. United States is involved in great
recession period in term paying more debt burden in the economy. Most important factor of
this crisis is due to rising competition and banking crisis in the Europe (Copelovitch, Frieden
& Walter 2016). United States has many of its consumer brands in Europe faced problems in
their profitability (Henning, 2017). They should pay attention on the cost of operations and

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the cost of buying raw materials in order to operate in Europe. United States must also pay
attention to the currency risks that can rise by hedging the contracts. Greece is an important
market of United States is in a state of liquidity problems in the economy. United States has
to identify its currency risks in order to manage its debt.
Conclusion
Therefore, it can be concluded that, the economic crisis of European countries like
Greek and Germany is a major consequences for not only the European Union, but for the
entire global businesses. The countries like United States must pay more attention to the
currency risks and costs of operations for doing investments of foreign direct invested in the
European countries.

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References
Arrese, Á., & Vara-Miguel, A. (2016). A comparative study of metaphors in press reporting
of the Euro crisis. Discourse & Society, 27(2), 133-155.
Buckley, P. J., Clegg, L. J., Voss, H., Cross, A. R., Liu, X., & Zheng, P. (2018). A
retrospective and agenda for future research on Chinese outward foreign direct
investment. Journal of International Business Studies, 49(1), 4-23.
Copelovitch, M., Frieden, J., & Walter, S. (2016). The political economy of the euro crisis.
Comparative Political Studies, 49(7), 811-840.
Frieden, J., & Walter, S. (2017). Understanding the political economy of the Eurozone crisis.
Annual Review of Political Science, 20.
Henning, C. R. (2017). Tangled governance: International regime complexity, the troika, and
the euro crisis. Oxford University Press.
Stockhammer, E., & Kohler, K. (2019). Financialization and demand regimes in advanced
economies. Post-Keynesian Economics Society Working Paper, (1911).